Coffee Prices Finish Sharply Higher As EU Regulations Threaten Supplies – CoffeeTalk

Coffee prices have surged on Thursday due to potential supply concerns following the European Parliament’s vote to change its deforestation regulations. If the EU cannot agree on changes before next month’s deadline, the EU Deforestation Regulation will be implemented, which could curb supplies of coffee from countries such as Brazil and Indonesia, where deforestation occurs. The EU’s Deforestation Regulation measure, known as EUDR, says companies must ensure the products they bring into the EU weren’t made in areas deforested or degraded after 2020.

The outlook for hot and dry conditions in Minas Gerais, Brazil’s biggest Arabica coffee-producing region, has supported robusta prices. Vietnam’s General Department of Customs reported that Vietnam’s October coffee exports fell -11.6% m/m to 45,412 MT and Vietnam’s Jan-Oct coffee exports fell -11.1% y/y to 1.15 MMT. Robusta coffee also has support from concerns that heavy rain in Vietnam will flood coffee fields, which could delay its coffee harvest.

Coffee prices have underlying support from concern about longer-term coffee crop damage due to Brazilian drought conditions. Rainfall in Brazil has consistently been below average since April, damaging coffee trees during the all-important flowering stage and reducing the prospects for Brazil’s 2025/26 arabica coffee crop. Robusta coffee prices are underpinned by reduced robusta production.

Conab, Brazil’s crop forecasting agency, cut its 2024 Brazil coffee production forecast on September 19 to 54.8 million bags from May’s forecast of 58.8 million bags. Global coffee exports in Sep rose +25% y/y to 10.76 mln bags and exports from Oct-Sep rose +11.7% y/y to 137.27 mln bags.

Recent rain in Brazil is negative for coffee prices. Somar Meteorologia reported that rainfall in Brazil’s biggest arabica coffee growing area of Minas Gerais received 123.9 mm of rain last week, or 349% of the historical average. Tightness in coffee inventories is supporting coffee prices. ICE-monitored arabica coffee inventories partially recovered from the 24-year low of 224,066 bags posted in November 2023 to post a 1-3/4 year high of 873,589 bags Thursday.

Brazilian coffee export news has been bearish. Cecafe reported that Brazil’s Oct green coffee exports rose +11% y/y to 4.57 million bags and 2023/24 coffee exports rose +33% y/y to a record 47.3 million bags. The International Coffee Organization (ICO) projected that 2023/24 global coffee production would climb +5.8% y/y to a record 178 million bags due to an exceptional off-biennial crop year.

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