Coffee Prices Lower on Brazilian Real Weakness and Harvest Pressures

December arabica coffee (KCZ22) on Friday closed down -4.15 (-1.84%), and Nov ICE Robusta coffee (RMX22) closed down -29 (-1.33%).

Coffee prices Friday fell sharply, with robusta falling to a 1-1/2 month low.  Weakness in the Brazilian real was bearish for coffee prices after the real (^USDBRL) Thursday tumbled to a 2-month low against the dollar.  A weaker real encourages export selling from Brazil's coffee producers.  

Coffee harvest pressures in Brazil are bearish factor for coffee prices.  Cooxupe cooperative, one of Brazil's biggest coffee producers, reported last Wednesday that Brazil's coffee harvest was 99.4% completed as of Sep 16.  Coffee producer sales typically increase during harvest time to make space for storing their newly-picked crops.  

Coffee prices are also under pressure on signs of abundant rain in Brazil that may promote flowering for next year's coffee crop.  Somar Meteorologia reported Monday that Minas Gerais had 28.3 mm of rain last week, or 132% of the historical average.  Minas Gerais accounts for about 30% of Brazil's arabica crop.

Robusta coffee is under pressure on robust supplies from Vietnam after Vietnam's General Department of Customs reported Thursday that Vietnam's coffee exports in the nine months through Sep rose +13.7% y/y to 1.35 million metric tons.  Vietnam is the world's biggest producer of robusta coffee beans.  The USDA June 7 revised its 2021-22 coffee production estimate for Vietnam upward to 31.58 million bags from 31.1 million bags but said 2022/23 production would fall by -2.2% y/y to 30.9 million bags.  

Abundant U.S. coffee supplies are bearish for coffee prices.  The Green Coffee Association on Sep 15 reported that U.S. Aug green coffee inventories rose +3.6% m/m and +5.2% y/y to a 2-year high of 6,450,086 mln bags.  

Tight arabica supplies are bullish for prices after ICE-monitored arabica coffee inventories Friday fell to a 23-year low of 426,180 bags.

In a bullish factor, Brazil's crop agency Conab last Tuesday cut its 2022 Brazil coffee production estimate to 50.4 mln bags from a May estimate of 53.4 mln bags as adverse weather curbed coffee yields.  This year was supposed to be the higher-yielding year of Brazil's biennial coffee crop, but coffee output this year was slashed by drought.

In a bullish factor, the Colombia Coffee Growers Federation reported Sep 12 that Colombia's Aug coffee exports dropped -21% y/y to 872,000 bags.  Also, Colombia's Jan-Aug coffee production is down -7% y/y at 7.3 mln bags.  Colombia is the world's second-largest producer of arabica beans.

Smaller global coffee exports are supportive of coffee prices.  The International Coffee Organization (ICO) on Aug 31 reported that global coffee exports in July fell -6.6% y/y to 10.12 mln bags, and total exports from Oct-July were down -0.3% y/y to 108.8 mln bags.  Also, Cecafe Sep 12 reported that Brazil Aug coffee exports fell -2.5% y/y to 2.8 mln bags.

In a bearish factor, the USDA, in its bi-annual report released on June 23, projected that 2022/23 global coffee production would climb +4.7% y/y to 174.95 mln bags, primarily due to Brazil's arabica crop entering the on-year of the biennial production cycle.  The USDA projects that 2022/23 global coffee ending stocks will climb +6.3% y/y to 34.704 mln bags.
 

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