September arabica coffee (KCU22) this morning is down -6.25 (-2.73%), and Sep ICE Robusta coffee (RMU22) is down -43 (-2.06%).
Coffee prices this morning dropped to 1-week lows and are moderately lower. Coffee prices are retreating after the USDA, in its bi-annual report, Thursday projected 2022/23 global coffee production to climb +4.7% to 174.95 mln bags, primarily due to Brazil's arabica crop entering the on-year of the biennial production cycle. The USDA also projects 2022/23 global coffee ending stocks to climb +6.3% to 34.704 mln bags.
Weakness in the Brazilian real is another bearish factor for coffee prices as the real (^USDBRL) today fell to a 4-1/2 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.
More Coffee News from Barchart
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