March arabica coffee (KCH24) this morning is down -6.00 (-3.24%), and Mar ICE robusta coffee (RMH24) is down -16 (-0.50%).

Coffee prices this morning are under pressure, with arabica falling to a 7-week nearest-futures low.  Weakness in the Brazilian real has sparked selling of arabica coffee futures as the real (^USDBRL) dropped to a 1-month low today against the dollar.  The weaker real encourages export selling by Brazil's coffee producers.  Robusta prices are consolidating below Tuesday's record high.

On Tuesday, robusta coffee soared to an all-time nearest-futures (RBF24) high.  Scant robusta coffee supplies have sparked fund buying of robusta coffee futures.  ICE-monitored robusta coffee inventories Tuesday fell to a record low of 3,113 lots.  Also, robusta coffee supplies are expected to tighten further in the cash market as Vietnam's coffee farmers hoard supplies in anticipation of even higher prices.  Vietnam is the world's largest producer of robusta coffee beans.

Low coffee inventories are bullish for prices.  On Tuesday, ICE-monitored robusta coffee inventories fell to a record low of 3,113 lots.  ICE-monitored arabica coffee inventories fell to a 24-year low of 224,066 bags on November 30, although they recovered modestly last Friday to a 6-week high of 261,446 bags.  

Tight robusta coffee supplies are bullish for prices.  Vietnam's General Department of Customs reported last Wednesday that Vietnam's 2023 (Jan-Dec) coffee exports fell -8.7% y/y to 1.62 MMT.   Also, Vietnam's agriculture department on November 3 projected Vietnam's coffee production in the 2023/24 crop year could drop by -10% to 1.656 MMT, the smallest crop in four years, due to drought.  Meanwhile, the Vietnam Coffee Association on December 5 projected that 2023/24 Vietnam coffee production would fall to 1.6 MMT-1.7 MMT, down from 1.78 MMT a year earlier.  

Arabica coffee prices are supported by concern that recent dry weather in Brazil will damage coffee crops.  Somar Meteorologia reported last Monday that Brazil's Minas Gerais region received only 42.4 mm of rainfall in the past week, or 60% of the historical average.  Minas Gerais accounts for about 30% of Brazil's arabica crop.

A bearish factor for coffee prices in increased exports from Brazil after exporter group Cecafe reported Brazil's Dec green coffee exports jumped +31% y/y to 3.78 million bags.  Also, Brazil's Trade Ministry reported Brazil's Dec coffee exports (not roasted) jumped +33.7% y/y to 244 MMT.  Brazil is the world's largest producer of arabica coffee beans.

An increase in global coffee supplies is negative for prices after the International Coffee Organization (ICO) reported on January 3 that Nov global coffee exports rose +4.1% y/y to 10.61 million bags and Oct-Nov coffee exports are up +3.1% y/y at 20.25 million bags.

The U.S. Climate Prediction Center on June 8 declared an El Nino weather event, which is likely to support coffee prices.  An El Nino pattern typically brings heavy rains to Brazil and drought to India, negatively impacting coffee crop production.  The El Nino event may bring drought to Vietnam's coffee areas late this year and in early 2024, according to an official from Vietnam's Institute of Meteorology, Hydrology, and Climate Change.

In a bearish factor, the International Coffee Organization (ICO) projected on December 5 that 2023/24 global coffee production would climb +5.8% y/y to 178 million bags due to an exceptional off-biennial crop year.  ICO also projects global 2023/24 coffee consumption will rise +2.2% y/y to 177 million bags, resulting in a 1 million bag coffee surplus.

The USDA's Foreign Agriculture Service (FAS), in its biannual report released on December 21, 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.  The USDA's FAS forecasts that 2023/24 ending stocks will fall by -4.0% to 26.5 million bags from 27.6 million bags in 2022-23.  The USDA's FAS projects that Brazil's 2023/24 arabica production would climb +12.8% y/y to 44.9 mln bags due to higher yields and increased planted acreage.  The USDA's FAS also forecasts that 2023/24 coffee production in Colombia, the world's second-largest arabica producer, will climb +7.5% y/y to 11.5 mln bags.
 

• Is Restaurant Brands International’s Carrols Buy a Slam-Dunk Win for QSR Stock?
• Cocoa Prices Finish Sharply Higher as Global Supplies Shrink
• Sugar Prices Jump as the El Nino Weather Pattern Disrupts Global Sugar Production
• Robusta Coffee Prices Post a Record High on Scant Global Supplies