Coffee Prices Plummet After Hitting 47-Year High – CoffeeTalk

Coffee prices plummeted to 1-week lows on Monday due to long liquidation pressures and the weakness in the Brazilian real. The weaker real encourages export selling from Brazil’s coffee producers. Last Friday, March Arabica posted a contract high, and December Arabica posted a 47-year nearest-futures high. January robusta coffee posted a 2-1/2 month high.

The impact of dry El Nino weather earlier this year may lead to longer-term coffee crop damage in South and Central America. 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. Brazil has been facing the driest weather since 1981, according to the natural disaster monitoring center Cemaden.

Below-average rainfall in Brazil may curb the country’s coffee output and is bullish for prices. Somar Meteorologia reported that rainfall in Brazil’s biggest arabica coffee growing area of Minas Gerais received 17.8 mm of rain last week, or only 31% of the historical average. Robusta coffee prices are underpinned by reduced robusta production. Vietnam’s coffee production in the 2023/24 crop year dropped by -20% to 1.472 MMT, the smallest crop in four years. The USDA FAS projected that Vietnam’s robusta coffee production in the new marketing year of 2024/25 will dip slightly to 27.9 million bags from 28 million bags in the 2023/24 season.

Tight robusta supplies are supportive for 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 after recent rains flooded coffee fields and delayed the coffee harvest.

Coffee prices have carryover support from November 22 when the USDA’s Foreign Agricultural Service (FAS) projected Brazil’s 2024/25 coffee production at 66.4 MMT, below the USDA’s previous forecast of 69.9 MMT. 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.

In a bearish factor, the International Coffee Organization (ICO) recently 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. The USDA’s bi-annual report on June 20 was bearish for coffee prices.

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