Coffee Prices Post Moderate Gains On Tight Supplies – CoffeeTalk

Coffee prices experienced moderate gains on Wednesday, with robusta coffee recovering from a 1-month low. Tightness in coffee inventories supported the prices, with arabica and robusta coffee inventories falling to 4-month lows. However, gains in coffee were limited as the Brazilin real fell to a 3-1/2 week low against the dollar, encouraging export selling by Brazil’s coffee producers. Rainfall forecasts in Brazil eased drought concerns and limited the upside in coffee prices.

The International Coffee Organization (ICO) reported that global coffee exports rose 6.5% y/y in August to 10.92 million bags and 9.9% y/y to 125.67 million bags during Oct-Aug. Dec arabica coffee soared to a 13-year nearest-futures high, and Nov robusta rose to a contract high. Coffee prices saw strength as adverse weather in key coffee-producing countries threatened global coffee production. Brazil has been facing the driest weather since 1981, with rainfall consistently being below average since April, damaging coffee trees during the flowering stage and reducing prospects for Brazil’s 2025/26 arabica coffee crop.

Robusta coffee prices are underpinned by fears that excessive dryness in Vietnam will damage coffee crops and curb future global robusta production. Vietnam’s agriculture department reported a 20% drop in coffee production in the 2023/24 crop year due to drought, while the USDA FAS projected a slight dip in Vietnam’s robusta coffee production in the new marketing year of 2024/25.

Conab, Brazil’s crop forecasting agency, cut its 2024 Brazil coffee production forecast to 54.8 million bags from 58.8 million bags forecast in May. Brazil’s green coffee exports rose 1.4% y/y to 3.41 million bags, consistent with other recent news showing higher exports. The International Coffee Organization (ICO) said that 2023/24 global coffee production climbed +5.8% y/y to 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, with the FAS projecting a 4.2% y/y increase in world coffee production in 2024/25, with a 4.4% increase in arabica production to 99.855 million bags and a 3.9% increase in robusta production to 76.38 million bags. Brazil’s 2024/25 arabica production would climb 7.3% y/y to 48.2 million bags due to higher yields and increased planted acreage.

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