Summary of Arabica and Robusta coffee prices last week

Mar arabica coffee prices (KCH21) on Friday closed up +0.55 (+0.45%), and Jan ICE Robusta coffee prices (RMF21) closed up +9 (+0.68%).

Coffee prices on Friday settled moderately higher, with arabica at a 1-1/2 week high. Arabica coffee gained on updated weather forecasts that call for a smaller amount of precipitation than was previously forecast for Brazil’s coffee-growing areas this week. Robusta coffee prices found support Friday on the slow pace of the Vietnam coffee harvest, with only 32% of Vietnam’s 2020/21 coffee crop harvested as of December 8, well behind the 5-year average of 55%.

Robusta London chart January 2021 week 50 (from December 7, 2020 - December 12, 2020)

Robusta London chart January 2021 week 50 (from December 7, 2020 – December 12, 2020)

Coffee prices earlier this week traded on the defensive. CeCafe on Wednesday reported that Brazil Nov green coffee exports jumped +36% y/y to 4.0 mln bags, the most ever for any month. Also, Somar Meteorlogia on Wednesday said in the seven days through December 11, as much as 50-100 mm of rain will reach the coffee-growing region of Minas Gerais, Brazil’s largest arabica coffee-producing region.

Surging Covid infections throughout the world have prompted governments to impose new restrictions that have curbed coffee consumption. German Economy Minister Altmaier said last Monday that virus restrictions could last into early spring in Germany. Also, U.K. senior sources said that restrictions in the U.K. wouldn’t likely end until Easter of next year. The Covid virus has now infected 70.890 million persons globally, with deaths exceeding 1.591 million.

A rebound in coffee inventories is bearish for prices after ICE-monitored arabica coffee inventories on Wednesday rose to a 3-1/2 month high of 1.316 mln bags, recovering further from the 20-year low of 1.096 mln bags posted on October 5. Also, ICE-monitored robusta coffee inventories climbed to a 7-1/4 month high Tuesday, rebounding from the 1-3/4 year low of 10,808 lots posted on October 14.

Monday’s data from the Colombia Coffee Growers Federation was mixed for arabica prices. On the positive side, Colombia Nov coffee production fell -4% y/y yo 1.443 mln bags. Conversely, Colombia Nov coffee exports rose +9% y/y to 1.271 mln bags. Colombia is the world’s second-largest producer of arabica beans.

Arabica coffee has support after the International Coffee Organization (ICO) last Wednesday cut its global 2019/20 coffee surplus estimate to 961,000 bags from a previous estimate of +1.24 mln bags and projected global 2019/20 arabica coffee production would fall -5.1% y/y to 95.732 mln bags. However, the ICO projected global 2019/20 robusta coffee production would climb +3.2% y/y to 72.822 mln bags.

On November 27, arabica coffee rallied to a 2-1/2 month high after Volcafe Ltd. projected that Brazil 2021/22 coffee production will fall -33% y/y to 34.2 million bags as Brazil’s arabica trees enter the lower-yielding half of a biennial cycle and that losses in coffee output will be exacerbated from excessive dryness in Brazil’s coffee-growing regions. Volcafe also projects that the slump in Brazil coffee output will drive the global arabica market into a record -11 mln bag deficit in 2021/22. In addition, Marex said that coffee demand would rebound after Covid vaccines are introduced, and that will turn the global coffee market in 2021/22 to a deficit of 8 mln bags from a 2020/21 global coffee surplus of 7 mln bags.

Arabica coffee has support from recent dryness in Brazil’s coffee-growing regions. Coffee growing areas of Minas Gerais have faced above-average temperatures and a lack of significant rain in the past six months, which has depleted soil moisture levels and water resources for irrigation. The U.S. Climate Prediction Center on September 24 said a La Nina weather pattern has emerged in the Pacific Ocean, which could lead to below-average precipitation in Brazil in Q4.

A bullish factor for coffee prices is concern about damage to coffee crops and infrastructure in Central America after Hurricane Iota on November 16 slammed into Central America as a Category 4 hurricane. Many roads and bridges were destroyed in Honduras, Nicaragua, and El Salvador from flash floods and landslides as the damage was exacerbated by saturated soil caused by Hurricane Eta just several weeks prior that devastated Central America. Last Monday, the ICO said that coffee losses in Honduras might reach 200,000 bags from hurricane damage, and the USDA’s Foreign Agricultural Service (FAS) said Monday that damage assessment from other countries continues because “many areas remain flooded and subsequent rains have complicated efforts.”

Also weighing on coffee prices, the November 20 report by the USDA’s Foreign Agricultural Service (FAS) forecasting that Brazil’s 2020/21 coffee production would climb +14.5% y/y to a record 67.9 mln bags.

Robusta coffee prices also has support on coffee-crop concerns in Vietnam. The National Weather Agency in Vietnam said last Monday that Vietnam’s Central Highlands, the country’s major coffee-growing region, might receive as much as 20% to 40% more rain than the long-term average in December. Typhoon Molave late last month slammed into Vietnam, the world’s largest producer of robusta coffee, and damaged crops and infrastructure in the Central Highlands of Vietnam, which will delay Vietnam’s coffee harvest. Robusta coffee supplies are already tight after data from Vietnam’s General Department of Customs showed Vietnam Nov coffee exports fell -41.7% m/m to 70,000 MT, and Jan-Nov exports are down -3.9% y/y at 1.412 MMT.

A La Nina weather system is prolonging the rainy season in Vietnam’s Central Highlands. The rainy season in the Central Highlands usually ends in the first week of November, but according to the Buon Ma Thuot Coffee Association, the La Nina weather pattern’s influence may prolong the rainy season until December. The USDA’s Foreign Agricultural Service (FAS) on June 10 forecasted that Vietnam’s 2020/21 coffee production would fall -3.5% y/y to 30.2 mln bags.


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