Arabica Coffee Climbs on Reduced Brazil Coffee Exports

March arabica coffee (KCH23) this morning is up +3.60 (+2.33%), and Mar ICE robusta coffee (RMH23) is down -4 (-0.21%).

Coffee prices this morning are mixed, with arabica posting a 2-week high.  Robusta fell back from a 2-3/4 month high as a stronger dollar sparked long liquidation in robusta futures.  

A bullish factor for coffee prices was last Monday's report from Cecafe that showed Brazil's 2022 green coffee exports fell -2.7% y/y to 35.6 mln bags, the lowest in 4 years.

An excessive short position in arabica coffee futures could fuel short covering pressures after last Friday's weekly Commitment of Traders (COT) report showed funds boosted their net-short arabica coffee positions by 10,308 the week ended January 17 to 40,480, a 3-year high.

Robusta coffee has support from supply concerns.  Last Thursday, Conab forecasted the 2023 Brazil robusta crop would fall -3.8% to 17.4 mln bags.  Also, tighter current supplies are bullish for robusta after ICE-monitored robusta coffee inventories fell to a 4-1/2 year low today of 6,334 lots.

Robusta also has support after coffee trader Volcafe forecasted that the global 2023/24 robusta coffee market would see a record deficit of 5.6 mln bags as Indonesia, the world's third-largest robusta producer, is expected to see its 2023/24 robusta coffee production fall to 9.1 mln bags, the smallest robusta crop in 10 years due to damage from excessive rainfall across its growing regions.

An easing of dry conditions in Brazil may boost coffee yields and is bearish for prices.  Somar Meteorologia reported today that Brazil's Minas Gerais region received 71.9 mm of rain last week, or 170% of the historical average.  Minas Gerais accounts for about 30% of Brazil's arabica crop.

Abundant arabica coffee supplies are negative for prices.  ICE arabica coffee inventories have risen steadily since falling to a 23-year low of 382,695 bags on November 3 and posted a 6-1/2 month high of 859,564 bags last Thursday.  Also, Conab last Thursday forecasted the 2023 Brazil arabica crop would rise +14.4% to 37.4 mln bags.

Increased coffee exports from Vietnam, the largest robusta producer, are bearish for robusta prices after the General Statistics Office of Vietnam reported on January 9 that Vietnam's 2022 coffee exports were seen up +13.8% y/y at 1.8 MMT.

On the bullish side for coffee prices was the January 4 report from the Colombia Coffee Growers Federation that showed Colombia's 2022 coffee exports fell -8% y/y to 11.1 mln bags.  Colombia is the world's second-biggest producer of arabica coffee beans.

On the bearish side, U.S. green coffee inventories are plentiful after the Green Coffee Association last Tuesday reported that U.S. Dec green coffee inventories rose +9.3% y/y to 6.38 mln bags.  Also, Conab on December 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.

The USDA, in its bi-annual report released on December 23, 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.  

The International Coffee Organization (ICO) reported on December 2 that global coffee exports in Oct fell -1.9% y/y to 9.87 mln bags.

In a bullish factor, the USDA's Foreign Agriculture Service (FAS) on November 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.
 

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