Coffee Prices Fall on Brazilian Real Weakness

September arabica coffee (KCU22) today is down -6.85 (-3.11%), and Sep ICE Robusta coffee (RMU22) is down -21 (-1.06%).

Coffee prices are sharply lower on today's weakness in the Brazilian real (^USDBRL), which is down by -1.80% against the dollar.  The weaker Brazilian real encourages export selling by Brazil's coffee producers.  

Coffee prices are seeing some underlying support from concern that excessive dryness in Brazil may lead to lower coffee yields supports prices.  Somar Meteorologia reported Monday that Minas Gerais received no rain last week, or 0% of the historical average, for the second straight week.  Minas Gerais accounts for about 30% of Brazil's arabica crop.  

Signs of increased global coffee supplies are bearish for prices after the International Coffee Organization (ICO) reported last Tuesday that global 2022 coffee exports for Oct-May were up +1.3% y/y at 88.506 mln bags.  Also, the Colombia Coffee Growers Federation reported last Wednesday that Colombia's June coffee exports rose +6% y/y to 939,000 bags.  Colombia is the world's second-largest producer of arabica beans.

Vietnam's General Department of Customs reported in late June that Vietnam's June coffee exports were up +13.3% y/y at 145,000 MT, and Jan-Jun coffee exports rose +21.7% y/y to 1.027 MMT.  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 shrinking ICE coffee inventories.  ICE monitored arabica coffee inventories continued to fall and dropped to a new 22-year low of 789,981 bags last Friday.

In a bearish factor, the USDA, in its bi-annual report released on June 23, projected that 2022/23 global coffee production would 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 that 2022/23 global coffee ending stocks will climb +6.3% y/y to 34.704 mln 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 Higher on Brazilian Real Strength and Tight ICE Inventories
• Coffee Prices Recover Early Losses on Strength in Brazilian Real
• Coffee Prices Weighed Down by Abundant Supplies
• Coffee Prices Under Pressure on Abundant Supplies