Arabica Coffee Prices Firm on Tight ICE Coffee Inventories

September arabica coffee (KCU22) on Wednesday closed up +1.65 (+0.76%), and Sep ICE Robusta coffee (RMU22) was unchanged.

Coffee prices Wednesday settled steady to higher, with arabica climbing to a 1-week high.  Tighter ICE coffee inventories are supporting arabica prices after ICE monitored arabica coffee inventories Wednesday fell to a new 23-year low of 718,617 bags.

Coffee prices also have support from concern about lower coffee yields in Brazil after Somar Meteorologia reported that Minas Gerais received 0.5 mm of rain last week, or 12% of the historical average.  Minas Gerais accounts for about 30% of Brazil's arabica crop.  

Abundant robusta coffee supplies are bearish for prices.  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.  

In a bearish factor, the Green Coffee Association reported last Friday that U.S. June green coffee inventories rose +0.8% m/m and +4.7% y/y to a 10-month high of 6.05 million bags.  

Increased coffee supplies are bearish for prices after Cecafe reported on July 6 that Brazil's Jun green coffee exports rose +0.6% y/y to 2.793 mln bags.

Signs of increased global coffee supplies are bearish for prices after the International Coffee Organization (ICO) reported July 5 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 on July 6 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.

Brazilian coffee farmers harvested 59% of the 2022/23 coffee crop as of July 12, slower than the 5-year average of 65%.

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.
 

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