Coffee Prices Climb on Brazil Crop Concerns

March arabica coffee (KCH23) this morning is up +7.55 (+4.52%), and Mar ICE robusta coffee (RMH23) is up +11 (+0.59%).

Coffee prices this morning are sharply higher, with arabica posting a 1-1/2 month high and robusta posting a 2-week high.  Drier-than-normal conditions in Brazil may curb coffee yields and are supportive of coffee prices.  Somar Meteorologia reported Monday that Brazil's Minas Gerais region received 31.7 mm of rain last week, or 72% of the historical average.  Minas Gerais accounts for about 30% of Brazil's arabica crop.

Robusta has support from ever-tighter coffee inventories as ICE-monitored robusta coffee inventories sank to a 4-1/2 year low today of 6,434 lots.

Coffee prices also have support after the USDA, in its bi-annual report released last Wednesday, cut its global 2022/23 coffee production estimate by -1.3% to 172.8 mln bags from a June estimate of 175.0 mln bags.  In addition, the USDA cut its 2022/23 global coffee ending stocks estimate by -1.7% to 34.1 mln bags from a June estimate of 34.7 mln bags.  

In a bearish factor for arabica, ICE arabica coffee inventories have risen steadily since falling to a 23-year low of 382,695 bags on Nov 3 and posted a  5-1/2 month high of 788,275 bags last Thursday.

On the negative side, Conab on Dec 15 raised its 2022 Brazil coffee production estimate to 50.9 mln bags from a 50.4 mln bag estimate in Sep, up +6.7% y/y.

A bearish factor for robusta is ample coffee supplies from Vietnam.  The General Statistics Office of Vietnam reported on Dec 8 that Vietnam's Jan-Nov coffee exports were up +13.4% y/y at 1.58 MMT.  Vietnam is the world's biggest producer of robusta coffee beans.

The International Coffee Organization (ICO) reported on Dec 2 that global coffee exports in Oct fell -1.9% y/y to 9.87 mln bags.  Also, the Colombia Coffee Growers Federation last Monday reported that Colombia's Nov coffee exports fell -25% y/y to 854,000 bags.  Colombia is the world's second-largest producer of arabica beans.  Meanwhile, Cecafe reported on Nov 17 that Brazil's Oct green coffee exports fell -2.9% y/y to 3.18 mln bags.

In a bullish factor, the USDA's Foreign Agriculture Service (FAS) on Nov 22 cut its Brazil 2022/23 coffee production forecast by -2.6% to 62.6 mln bags from a prior estimate of 64.3 mln bags.  This year was supposed to be the higher-yielding year of Brazil's biennial coffee crop, but coffee output this year was slashed by drought.
 

• Restaurant Stocks Look Ready to Rebound in 2023
• Arabica Coffee Closes Lower on Brazilian Real Weakness
• Sugar Prices Retreat as Conab Hikes its Brazil Sugar Production Estimates
• NY Cocoa Prices Push Higher on a Weaker Dollar