Coffee Falls as USDA Projects Higher 2022/23 Global Output

September arabica coffee (KCU22) on Friday closed down -5.75 (-2.51%), and Sep ICE Robusta coffee (RMU22) closed down -42 (-2.01%).

Coffee prices Friday fell to 1-week lows and closed moderately lower.  Coffee prices retreated after the USDA, in its bi-annual report, Thursday projected 2022/23 global coffee production to climb +4.7% y/y 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% y/y to 34.704 mln bags.  

Weakness in the Brazilian real is another bearish factor for coffee prices as the real (^USDBRL) Friday 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 also 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%.  

Tightness in coffee inventories is a bullish factor for coffee prices as ICE monitored coffee inventories Friday fell to a 22-year low of 955,661 bags.

Larger U.S. coffee supplies are negative for prices 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.

Big Picture Coffee Market Factors: World coffee production in 2020/21 (Oct/Sep) will fall -2.1% y/y to 167.17 mln bags, with global consumption up +3.3% y/y at 170.298 mln bags (ICO).  The world coffee surplus/deficit in 2020/21 will fall into a deficit of -3.128 mln bags from a surplus of +5.965 mln bags in 2019/20 (ICO).  Total Brazil 2020/21 coffee exports rose +13.3% y/y to a record 45.6 mln bags (CeCafe).  ICO data shows global 2020/21 coffee exports (Oct-Sep) rose +1.2% y/y to 128.931 mln bags. 
 

• Coffee Slides as USDA Projects Higher 2022/23 Global Coffee Output
• Coffee Posts Moderate Losses as the Brazilian Real Slumps
• Coffee Retreats on Weakness in the Brazilian Real
• Coffee Closes Moderately Higher on Crop Concerns in Brazil