Coffee Sees Support from Continued Dry Brazil Weather

September arabica coffee (KCU22) today is up +3.60 (+1.72%), and Sep ICE Robusta coffee (RMU22) is up +42 (+2.06%).

Coffee prices are seeing support today from news of continued dry conditions in Brazil.  Somar Meteorologia today reported 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.

Smaller coffee supplies from Colombia are supportive of arabica prices.  The National Federation of Coffee Growers reported last Wednesday that Colombia's July coffee production fell -22% y/y to 944,000 bags.  Colombia is the world's second-largest producer of arabica beans.

Tightness in ICE-monitored arabica coffee inventories is bullish for prices after ICE inventories fell to a new 23-year low of 660,564 bags on Friday, the lowest level since 1999.

News of increased global coffee exports is bearish for coffee prices.  The International Coffee Organization (ICO) reported Aug 2 that global coffee exports in June rose +1.3% y/y to 1.11 million bags and that cumulative coffee exports in Oct-June rose +0.5% y/y to 98.77 million bags.  Honduras, the world's fourth-largest producer of arabica beans, reported on Aug 1 that July coffee exports fell -by 38% y/y to 409,668 bags due to a poor crop.  Brazil's June green coffee exports rose +0.6% y/y to 2.793 mln bags, according to a Cecafe report on July 6.

Vietnam's General Department of Customs reported Monday that Vietnam's coffee exports in July fell -17.1% m/m to 113,852 tons.  In the bigger picture, however, Vietnam's exports in the 7 months through July rose +17.3% y/y to 1.13 million tons.  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.  

According to last Friday's data from Safras and Mercado, Brazilian coffee farmers harvested 83% of the 2022/23 coffee crop as of Aug 2, modestly below the 5-year average of 86%.

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 projects that 2022/23 global coffee ending stocks will climb +6.3% y/y to 34.704 mln bags.
 

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