Brazil's Smaller Production Forecast Causes Coffee Price Surge – CoffeeTalk

Coffee prices have seen significant gains, with March arabica posting a contract high and December arabica posting a new 13-year nearest-futures high. The USDA’s Foreign Agricultural Service (FAS) projected Brazil’s 2024/25 coffee production at 66.4 MMT, below the official forecast of 69.9 MMT. The FAS also projected Brazil’s coffee inventories of 1.2 million bags when the 2024/25 season ends in June, down a -26% y/y. Coffee prices fell from their best levels today as a stronger dollar sparked profit-taking and long liquidation in coffee futures.

Coffee prices were already on the offensive due to concerns 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 flowering stage and reducing the prospects for Brazil’s 2025/26 arabica coffee crop. Vietnam’s General Department of Customs reported that Vietnam’s October coffee exports fell -11.6% m/m to 45,412 MT and Jan-Oct coffee exports fell -11.1% y/y to 1.15 MMT. Robusta coffee prices are underpinned by reduced robusta production, with Vietnam’s agriculture department reporting a 20% drop in coffee production in the 2023/24 crop year due to drought.

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. Recent rainfall in Brazil temporarily eased dryness concerns, with rainfall in Brazil’s biggest arabica coffee growing area of Minas Gerais receiving 60.9 mm of rain last week, or 127% of the historical average.

Signs of larger global coffee supplies are bearish for prices, with the International Coffee Organization (ICO) reporting that 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. Tightness in coffee inventories is supporting coffee prices, with ICE-monitored arabica coffee inventories partially recovering from the 24-year low of 224,066 bags posted in November 2023 to post a 1-3/4 year high of 879,117 bags.

Brazilian coffee export news has been bearish, with Cecafe reporting Brazil’s Oct green coffee exports rising +11% y/y to 4.57 million bags and 2023/24 coffee exports rising +33% y/y to a record 47.3 million bags. The USDA’s bi-annual report on June 20 was bearish for coffee prices, with the FAS projecting a +4.2% y/y increase in world coffee production in 2024/25.

Read More @ Nasdaq