Coffee Posts Moderate Losses as the Brazilian Real Slumps

July arabica coffee (KCN22) Thursday closed down -6.15 (-2.58%), and July ICE Robusta coffee (RMN22) closed down -28 (-1.34%).

Coffee prices Thursday posted moderate losses.  Weakness in the Brazilian real weighed on coffee prices as the real (^USDBRL) Thursday tumbled to a 4-1/4 month low against the dollar.  A weaker real encourages export selling by Brazil's coffee producers.  

Arabica on Wednesday rose to a 2-week high on concern that excessive dryness in Brazil may lead to lower coffee yields.  Somar Meteorologia reported Monday that Minas Gerais received no rain last week, or 0% of the historical average.  Minas Gerais accounts for about 30% of Brazil's arabica crop.  

Coffee prices are supported by a slow pace of Brazil's coffee harvest after Safras & Mercado reported Thursday that Brazil's 2022/23 coffee harvest was only 35% completed as of June 21, slower than the 5-year average of 44%.  

A negative factor for coffee prices is an increase in U.S. coffee supplies after the Green Coffee Association reported last Thursday that U.S. May green coffee inventories rose +1.6% m/m and +3.2% y/y to 6.004 million bags.

Robusta coffee remains under pressure on signs of abundant supplies after Vietnam's General Department of Customs reported June 7 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.  The USDA June 7 revised its 2021-22 coffee production estimate for Vietnam upward to 31.58 million bags from 31.1 million bags but said 2022/23 production would fall by -2.2% y/y to 30.9 million bags.

A supportive factor for arabica coffee is the smaller output in Colombia, the world's second-largest arabica producer.  The Colombia Coffee Growers Federation reported June 7 that Colombia's Jan-May coffee production was down -4% y/y at 4.5 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 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.
 

• Coffee Retreats on Weakness in the Brazilian Real
• Coffee Closes Moderately Higher on Crop Concerns in Brazil
• Coffee Prices Underpinned by Dry Conditions in Brazil
• Coffee Closes Moderately Higher on Dryness in Brazil