Coffee prices moved higher Friday with Dec arabica coffee at a 1-1/2 month high and Jan robusta coffee at a 4-week high as expectations for tighter future coffee supplies fueled fund buying of coffee futures. Marex Spectron Group on Monday raised its global 2019/20 coffee deficit estimate to -4.7 mln bags from a prior forecast of -3.4 mln bags. Also, Coex Coffee International on Monday forecasted a global 2019/20 coffee deficit of -6.6 mln bags as Brazil collects the smaller of its biennial harvest.
Arabica coffee also garnered support from strength in the Brazilian real, which rallied to a 2-1/2 month high Thursday against the dollar. A stronger real discourages export selling from Brazil's coffee producers.
Robusta coffee found support on tighter supplies from Vietnam, the world's largest robusta exporter, after the General Statistics Office of Vietnam reported on Wednesday that Vietnam Oct coffee exports fell -27% y/y to 100,000 MT.
Brazil crop concerns are bullish for coffee prices after Monday's data from Somar Meteorologia showed that rainfall in Minas Gerais, Brazil's largest arabica coffee growing region, measured 13.9 mm over the previous week, only 37% of the historical average.
On the bearish side for arabica coffee prices is the outlook for a bumper Brazil coffee crop. A coffee analyst at RR Consultoria Rural in Minas Gerais, Brazil's biggest arabica coffee growing region, said Oct 7 after he toured Brazil's coffee farms that the arabica coffee crop has had "exceptional" flowering. Also, the coffee director at Comexim said last Tuesday that some producers reported "flowering the best they have ever seen." Cooxupe, Brazil's largest arabica coffee cooperative, said it expects to ship 5 million bags of coffee this year, up +28% from last year.
Current coffee supplies are ample after the ICO reported Friday that global 2018/19 coffee exports (Oct-Sep) rose +8.1% y/y to 129.4 million bags. Also, the U.S. Green Coffee Association reported last Tuesday that U.S. Sep green coffee inventories surged +14% y/y to a 2-year high of 7.352 million bags.
On the supportive side, ICE-monitored arabica coffee inventories have tightened as they fell to a 13-month low of 2.235 million bags on Oct 10.
Big Picture Coffee Market Factors: World coffee production (Oct/Sep) in 2018/19 climbed by +3.9% y/y to a record 169.727 mln bags with global consumption up +2.1% y/y to 164.769 mln bags (ICO). The world coffee surplus in 2018/19 climbed to 4.958 mln bags from a 2017/18 surplus of 2.046 mln bags (ICO). USDA reports that global 2018/19 coffee production rose by +7.1% y/y to a record 171.166 mln bags and that global 2018/19 coffee ending stocks rose by +11.6% to a 3-year high of 32.812 mln bags.
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