Coffee Prices Supported by Small Global Coffee Supplies

Coffee prices today are moderately higher, with smaller coffee exports from Costa Rica and Vietnam experiencing a decline in exports. Brazil’s Minas Gerais region received no rain for the fourth consecutive week, which accounts for about 30% of Brazil’s arabica crop. The weakness in the Brazilian real (^USDBRL) is bearish for coffee prices as the real today fell to a new 2-1/2 year low against the dollar, encouraging export sales from Brazil’s coffee producers.

A rebound in ICE coffee inventories from historically low levels is negative for prices. ICE-monitored robusta coffee inventories fell to a record low of 1,958 lots on February 21, but they recovered to an 11-3/4 month high on June 20 of 5,995 lots. ICE-monitored arabica coffee inventories fell to a 24-year low of 224,066 bags on November 30, but they recovered to a 16-month high last Tuesday of 842,434 bags.

A faster pace of Brazil’s coffee harvest is boosting coffee supplies and is bearish for prices. Robusta coffee prices are underpinned by fears that excessive dryness in Vietnam will damage coffee crops and curb global production. Coffee trader Volcafe reported that Vietnam’s 2024/25 robusta coffee crop may only be 24 million bags, the lowest in 13 years, as poor rainfall in Vietnam has caused “irreversible damage” to coffee blossoms.

Vietnam’s agriculture department said on March 26 that Vietnam’s coffee production in the 2023/24 crop year would drop by -20% to 1.472 MMT, the smallest crop in four years, due to drought. The Vietnam Coffee Association also said that Vietnam’s 2023/24 coffee exports would drop -20% y/y to 1.336 MMT.

Recently, there has been some bearish arabica coffee export news, with Brazil’s May green coffee exports surged 90% y/y to 4 million bags. The International Coffee Organization (ICO) projected that 2023/24 global coffee production would climb +5.8% y/y to 178 million bags due to an exceptional off-biennial crop year. The USDA’s bi-annual report released on June 20 was bearish for coffee prices, with the FAS projecting that world coffee production in 2024/25 will increase +4.2% y/y to 176.235 million bags, 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.

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