
July arabica coffee (KCN22) on Friday closed down -1.40 (-0.65%), and July ICE Robusta coffee (RMN22) closed down -18 (-0.87%).
Coffee prices Friday settled moderately lower as frost risks for Brazil eased. Updated weather forecasts Friday called for slightly warmer temperatures for next week in Brazil than were initially forecast, which reduces the chance of frost developing in Brazil's coffee-growing regions. NOAA previously said on Wednesday that temperatures in southern Brazil, an area that includes many of the country's coffee-growing regions, might be hit by frost by May 16 and that temperatures could remain well below normal through May 19.
On Tuesday, arabica fell to a 6-month low, and robusta dropped to a 2-month low as dry conditions eased in Brazil. Somar Meteorologia reported Monday that there was 12.4 mm of rainfall (161% of the historical average) in the Minas Gerais area last week, an area that accounts for about 30% of Brazil's arabica crop.
Coffee prices were recently on the defensive from global demand concerns. The Chinese government said last Friday that it would continue with its stringent pandemic lockdowns in Shanghai and Beijing, which will keep restaurants and cafes closed and curb coffee consumption in China. Also, the war in Ukraine has curbed Brazil's coffee exports, with Brazil's Mar coffee exports to Russia down -72% m/m and down -62% m/m to Ukraine.
Robusta coffee last Thursday rallied to a 5-week high on concern about smaller coffee supplies from Vietnam. The Vietnam Coffee and Cocoa Association warned last Wednesday that the high fertilizer prices might force coffee farmers to reduce their fertilizer usage, which could lead to a 10% drop in coffee production next season. Vietnam is the world's largest producer of robusta coffee beans.
A supportive factor for arabica was smaller coffee supplies from Colombia, the world's second-largest arabica producer. The Colombian Coffee Growers' Federation reported last Thursday that Colombian Apr coffee exports dropped -18% y/y to 845,000 bags.
Signs of smaller global coffee supplies are bullish for prices after the International Coffee Organization (ICO) reported last Tuesday that global 2022 coffee exports during Oct-Mar fell -0.1% y/y to 66.25 mln bags.
Coffee prices have seen downward pressure from a rebound in coffee inventories. ICE-monitored arabica coffee inventories rose to a 3-month high on March 25, and ICE robusta inventories climbed to a 4-month high. ICE coffee inventories have recovered since arabica inventories in February posted a 22-year low, and ICE robusta inventories posted a 3-1/4 year low.
Concern about tighter global coffee supplies is supportive of prices. On Apr 11, Brazil's coffee export council, CeCafe, reported that Brazil's Mar green coffee exports fell -by 5.8% y/y to 3.267 mln bags. Also, Colombia, the world's second-biggest arabica producer, reported on Apr 5 that its March coffee production fell -by 13% y/y to 914,000 bags. In addition, the International Coffee Organization (ICO) on Mar 31 reported that global coffee exports during Oct-Feb fell -by 0.8% y/y to 53.2 mln bags.
Increased supply from Vietnam is bearish for robusta prices after Vietnam's General Statistics Office reported last Thursday that Vietnam's Jan-Apr coffee exports jumped +28.4% y/y to 752,000 MT.
The International Coffee Organization (ICO) recently cut its global 2020/21 supply estimate to a deficit of -3.13 mln bags from a previous estimate of a +1.2 mln bag surplus. In addition, ICO lowered its global 2020/21 its global 2020/21 coffee production estimate to 167.17 mln bags from 168.88 mln bags and raised its 2020/21 global coffee consumption estimate to 170.30 mln bags from 167.68 mln bags. However, Citigroup last Wednesday projected that the 2022/23 global coffee market would shift to a surplus of +3.5 mln bags from a 2021/22 global coffee deficit of -7.3 mln bags.
Drought and recent frost events have devastated Brazil's coffee crop last year and have curbed the growth potential for the country's coffee crop for the next two years. Conab reported Dec 16 that Brazil's 2021 arabica coffee production fell to 31.4 mln bags, down -36% from 48.8 mln bags in 2020. The USDA's FAS projects that Brazil's 2021/22 coffee exports would tumble by -27% y/y to 33.2 mln bags from a record 45.67 mln bags in 2020/21 as drought and frosts curbed coffee production. However, Conab on Jan 18 projected that Brazil's 2022 coffee production would recover by +16.8% y/y to 55.7 mln bags.
Big Picture Coffee Market Factors: World coffee production in 2020/21 (Oct/Sep) will fall -2.1% y/y to 167.17 mln bags, with global consumption up +3.3% y/y at 170.30 mln bags (ICO). The world coffee surplus/deficit in 2020/21 will fall into a deficit of -3.13 mln bags from a surplus of +5.97 mln bags in 2019/20 (ICO). Total Brazil 2020/21 coffee exports rose +13.3% y/y to a record 45.6 mln bags (CeCafe). ICO data shows global 2020/21 coffee exports (Oct-Sep) rose +1.2% y/y to 128.931 mln bags.