Coffee Closes Higher on Global Coffee Crop Concerns
Coffee prices have been moderately higher due to concerns that drier-than-normal conditions will adversely affect Brazil’s coffee crops. Brazil’s Minas Gerais region received no rain for the second straight week in the past week, accounting for about 30% of Brazil’s arabica crop. 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. Volcafe also projects a global robusta deficit of 4.6 million bags in 2024/25, a smaller deficit than the 9-million-bag deficit seen in 2023/24 but the fourth consecutive year of robusta bean deficits.
Tight robusta coffee supplies from Vietnam, the world’s largest producer of robusta coffee beans, are a bullish factor. On March 26, Vietnam’s agriculture department projected 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 said that Vietnam’s 2023/24 coffee exports would drop -20% y/y to 1.336 MMT.
Last Wednesday, arabica fell to a 3-week low after Cecafe reported that Brazil’s May green coffee exports surged 90% y/y to 4 million bags. Coffee prices are also being pressured by Brazil’s faster coffee harvest, which has boosted coffee supplies. Consulting firm Safras & Mercado reported that Brazil’s 2024/25 coffee harvest was 29% completed as of June 4, faster than 26% last year at the same time and faster than the 5-year average of 27%.
A rebound in ICE coffee inventories from historically low levels is negative for prices. 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 Foreign Agriculture Service (FAS) projected that world coffee production in 2023/24 will increase +4.2% y/y to 171.4 million bags, with a +10.7% increase in arabica production to 97.3 million bags and a -3.3% decline in robusta production to 74.1 million bags.
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Source: Coffee Talk