Agro Business

Coffee Prices Soar to Highest in a Decade as Global Supplies Dwindle

Coffee prices this morning are rallying, with arabica at a 2-month high and robusta at a 3-1/2 week high.  Dwindling global coffee supplies are fueling fund buying of coffee futures today after ICE-monitored arabica coffee inventories fell to a 22-year low of 1.078 mln bags Monday.   Also, ICE-monitored robusta coffee inventories on Monday fell to a 3-1/4 year low of 9,212 lots.

The pandemic is easing in the U.S., which will lead to reduced restrictions that will be positive for social gatherings and coffee demand.  The 7-day average of new U.S. Covid infections fell to a 1-1/2 month low Monday of 265,700.

A bearish factor for arabica coffee is above-average rainfall in Brazil that may boost Brazil’s coffee yields.   Somar Meteorologia reported Monday that Minas Gerais, a region that accounts for about 30% of Brazil’s arabica coffee crop, received 118.4 mm of rain or 211% of the historical average last week.

A bearish factor for robusta was last Monday’s data from Vietnam’s General Statistics Office that showed Vietnam Jan coffee exports rose +9% y/y to 175,000 MT.  Vietnam is the world’s largest robusta coffee producer.

The Colombia National Federation of Coffee Growers reported last Friday that Colombia Jan coffee production fell -20% y/y to 868,000 bags, and Jan coffee exports fell -1% y/y to 1.063 mln bags.  Colombia is the world’s second-largest arabica coffee producer.

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The International Coffee Organization (ICO) on Jan 17 raised its global 2020/21coffee surplus to 2.41 mln bags from a prior view of 1.97 mln bags as they cut their global 2020/21 coffee consumption forecast by -423,000 bags to 167.3 mln bags.  

Conab projected Jan 18 that Brazil’s 2022 coffee production would climb +16.8% y/y to 55.7 mln bags.  

Arabica coffee prices are seeing support from expectations of lower global supplies due to unfavorable weather and supply chain disruptions.  Drought and recent frost events have devastated Brazil’s coffee crop this year and have curbed the growth potential for the country’s coffee crop for the next two years.  Conab reported Dec 16 that Brazil 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 -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.  On Jan 20, the ICO reported that total Nov global coffee exports fell -12.4% y/y to 9.246 mln bags.  On Jan 18, the Brazilian Trade Ministry reported that Brazil’s Dec coffee exports fell -8.7% m/m and -37.2% y/y to 160,000 MT.

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A supportive factor for robusta is the smaller robusta supply from Vietnam after Vietnam’s General Statistics Office reported last Thursday that total Vietnam 2021 coffee exports fell by -0.2% y/y to 1.61 MMT.  Surging freight costs and the limited availability of shipping containers have reduced coffee exports from Vietnam, the world’s top producer of robusta beans and the world’s second-largest overall coffee producer.

The International Coffee Organization (ICO) on Oct 7 cut its global 2020/21 coffee surplus estimate to 2.39 mln bags from 2.63 mln bags and raised its global coffee consumption estimate to 167.26 mln bags from 167.01 mln bags.  Global 2020/21 coffee exports (Oct-Sep) rose +1.2% y/y to 128.931 mln bags.

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