Arabica Coffee Gains on Production Concerns in Brazil

Coffee prices today are mixed, with Arabica coffee (KCU24) up +0.75 (+0.33%) and ICE robusta coffee (RMU24) down -16 (-0.39%). Arabica coffee gained support after Brazil’s coffee farmers picked smaller-than-usual beans this harvest after a period of heat and drought that harmed development. StoneX projected a global 2024/25 coffee surplus of 2 million to 3 million bags, below the USDA’s forecast of 5.6 million bags. The sell-off in the Brazilian real (^USDBRL) to a 2-1/2 year low against the dollar encourages export sales from Brazil’s coffee producers.

Concerns that drier-than-normal conditions would adversely affect Brazil’s coffee crops are also contributing to coffee prices. Somar Meteorologia reported that Brazil’s Minas Gerais region received no rain last week for the third consecutive week, accounting for about 30% of Brazil’s arabica crop. The pace of the Brazilian coffee harvest has picked up, a bearish factor for coffee prices.

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, although they recovered to an 11-1/2 month high last Thursday 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 Tuesday of 842,434 bags.

Robusta coffee prices are underpinned by fears that excessive dryness in Vietnam will damage coffee crops and curb global production. Coffee trader Volcafe said 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 on March 26 said 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 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.

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