Coffee Prices Fall on U.S. Economic Concerns

July arabica coffee (KCN22) is down -6.55 (-2.79%), and July ICE Robusta coffee (RMN22) is down -27 (-1.29%).

Coffee prices are sharpy lower on today's U.S. CPI and consumer sentiment reports, which sparked a broad-based sell-off in commodity prices on concern about the increased risks of a U.S. recession.

Arabica coffee has underlying support from dry conditions in Brazil.  Somar Meteorologia reported Monday that Minas Gerais received only 9.5 mm of rain last week, or 44% of the historical average.  Minas Gerais accounts for about 30% of Brazil's arabica crop.  

Robusta remains under pressure on signs of abundant supplies after Vietnam's General Department of Customs reported Tuesday that Vietnam's May coffee exports were up +9.3% y/y at 142,329 MT and Jan-May coffee exports rose +23.2% y/y to 881,565 MT.  Vietnam is the world's biggest producer of robusta coffee beans.

A supportive factor for arabica coffee is smaller output in Colombia, the world's second-largest arabica producer.  The Colombia Coffee Growers Federation reported Tuesday that Colombia's Jan-May coffee production was down -4% y/y to 4.5 million bags.  

Signs of adequate global coffee supplies are bearish for prices after the International Coffee Organization (ICO) reported last Wednesday that global 2022 coffee exports during Oct-Apr rose +0.6% y/y to 78.012 mln bags.  

Conab on May 19 raised its estimate for Brazil's 2022 coffee crop by +12% to 53.4 mln bags from a previous estimate of 47.7 mln bags.  

An increase in U.S. coffee supplies is bearish for prices after the Green Coffee Association reported May 23 that U.S. Apr green coffee inventories rose +1.5% m/m and +2.5% y/y to 5.907 million bags.

The International Coffee Organization (ICO) recently cut its global 2020/21 supply estimate to a deficit of -3.13 mln bags from a previous estimate of a +1.2 mln bag surplus.  In addition, ICO lowered its global 2020/21 its global 2020/21 coffee production estimate to 167.17 mln bags from 168.88 mln bags and raised its 2020/21 global coffee consumption estimate to 170.30 mln bags from 167.68 mln bags.  However, Citigroup on May 4 projected that the 2022/23 global coffee market would shift to a surplus of +3.5 mln bags from a 2021/22 global coffee deficit of -7.3 mln bags.

Drought and frost events devastated Brazil's coffee crop last year and have curbed the growth potential for the country's coffee crop for the next two years.  Conab reported Dec 16 that Brazil's 2021 arabica coffee production fell to 31.4 mln bags, down -36% from 48.8 mln bags in 2020.  The USDA's FAS projects that Brazil's 2021/22 coffee exports would tumble by -27% y/y to 33.2 mln bags from a record 45.67 mln bags in 2020/21 as drought and frosts curbed coffee production.  However, Conab on Jan 18 projected that Brazil's 2022 coffee production would recover by +16.8% y/y to 55.7 mln bags.