March arabica coffee (KCH19) on Friday closed down -1.70 (-1.63%) and March ICE robusta coffee (RMH19) closed down -17 (-1.10%). Coffee prices fell to 1-week lows Friday after the Brazilian real slid to a 1-week low against the dollar. The weaker real encourages exports by Brazil's coffee producers. Forecasted rain this weekend for Minas Gerais, Brazils' biggest coffee region, is also a negative for coffee prices since the rain should improve soil moisture levels and the prospects for Brazil's coffee crops. Data this week has been mixed for coffee prices.
Brazil, the world's second-biggest coffee consumer, reported Wednesday that Brazil 2017/18 domestic coffee use jumped +4.2% y/y to 21 mln bags. Another supportive factor was Wednesday's report of an -11% y/y fall in Guatemala Jan coffee exports to 207,095 bags, a sign of smaller supplies. On the negative side, the Columbian Coffee Growers' Federation reported Tuesday that Jan coffee exports from Columbia, the world's second-biggest arabica producer, rose +14.3% y/y to 1.204 mln bags. The Columbian Coffee Growers' Federation also projects that Columbia's 2019 coffee production will increase by +2.9% y/y to 14 mln bags.
Supplies are abundant after the International Coffee Organization (ICO) on Monday reported that global coffee exports during Oct-Dec were up +8.1% y/y at 30.9 mln bags. Also, ICE-monitored coffee inventories are just below the 4-1/2 year high of 2.489 mln bags posted on Jan 23.Big
Picture Coffee Market Factors:
Bullish factors for coffee include (1) projections from Conab, Brazil's official government forecasting agency, that Brazil 2019/20 coffee production will fall -18% y/y to 50.5 mln bags as the crop moves into the lower-yielding half of a 2-year cycle, (2) ICO's forecast for a 2017/18 global coffee deficit of -3.5 mln bags, and (3) USDA projections that global 2018/19 coffee consumption will climb +2.9% to a record 163.219 mln bags.
Bearish factors include (1) the +27% y/y surge in Brazil Dec green coffee exports to 3.36 mln bags, the highest ever for a December, (2) ample supplies as ICO data showed global 2017/18 coffee exports rose +2% y/y to 121.9 mln bags and global 2018/19 coffee exports Oct-Dec were up +8.1% y/y at 30.9 mln bags, (3) ICO's forecast for a global 2018/19 coffee surplus of 2.29 mln bags and its projection that a second year of surplus will depress coffee prices over the next few months, (4) heavy coffee supply as ICE-monitored coffee inventories climbed to a 4-1/2 year high of 2.489 mln bags, (5) Conab projections for Brazil's 2018 coffee production to climb +37% y/y to a record 61.7 mln bags as crops are in the higher-yielding half of their biennial cycle, and (6) USDA projections for global 2018/19 coffee production to climb +7.1% y/y to a record 171.166 mln bags and for global 2018/19 coffee ending stocks to increase by +11.6% to a 3-year high of 32.812 mln bags.
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