Coffee Prices Moderately Lower on Abundant U.S. Green Coffee Supplies

September arabica coffee (KCU22) on Tuesday closed down -6.15 (-2.73%), and Sep ICE Robusta coffee (RMU22) closed down -32 (-1.42%).

Coffee prices Tuesday closed moderately lower.  Signs of abundant U.S. coffee supplies undercut prices Tuesday after data from the Green Coffee Association showed U.S. July green coffee inventories rose +2.9% m/m and +2.5% y/y to a 1-3/4 year high of 6.223 mln bags.  

Arabica is also under pressure as heavy rain last week eased drought concerns in Brazil.  Data from Somar Meteorologia on Monday showed that Minas Gerais received 17.8 mm of rain in the past week, or 659% of the historical average.  Minas Gerais accounts for about 30% of Brazil's arabica crop.

Robusta on Monday extended last week's rally to a new 5-month nearest-futures high.  Vietnam's General Department of Customs reported last 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 seven 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.  

ICE-monitored arabica coffee inventories continue to tighten and are bullish for prices after ICE inventories on Monday fell to a new 23-year low of 571,580, the lowest level since 1999.

According to last Thursday's data from Safras and Mercado, Brazilian coffee farmers harvested 89% of the 2022/23 coffee crop as of Aug 9, slightly behind the 5-year average of 91% but in line with last year's level.  The arabica harvest is 84% complete, while the robusta harvest is 97% complete.

Smaller coffee supplies from Colombia are supportive of arabica prices.  The National Federation of Coffee Growers reported Aug 3 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.

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.  However, Cecafe reported last Wednesday that Brazil's July coffee exports fell -16% y/y to 2.17 million bags on logistics and harvest delays at the beginning of the harvest season.

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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