Sep arabica coffee (KCU20) on Friday closed +1.55 (+1.31%), and Sep ICE Robusta coffee (RMU20) closed +20 (+1.37%).
Coffee on Friday rallied back up towards Wednesday's highs, where Sep arabica coffee posted a 2-week high and Sep robusta coffee posted an 8-month high.
Coffee prices have recently seen strength from falling inventories. ICE-monitored arabica coffee inventories on Friday dropped to a 3-1/2 year low of 1.337 mln bags. ICE-monitored robusta coffee inventories on Friday rose to 10,964 lots, which was slightly above Thursday's 1-3/4 year low of 10,945 lots.
Somar Meteorologia is forecasting some rain in coffee-growing areas through the weekend, which may trigger tree flowerings. However, Somar is then forecasting a possible spell of dry weather and above-average temperatures starting next week.
Brazil's regional cooperative company, Cooxupe, reported on Wednesday that its group's coffee harvest as of Aug 14 was 84% complete, which matches the 5-year average but is slower than last year's pace of 94%.
Robusta coffee is seeing support from tighter supplies after the General Department of Vietnam Customs reported last Wednesday that Vietnam's July coffee exports fell -22% y/y to 141,282 MT and that cumulative Vietnam Jan-Jul coffee exports fell -1.01% y/y to 1.05 MMT. 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. Vietnam is the world's largest producer of robusta beans.
Coffee prices are seeing support from ICO projections for a coffee supply deficit for 2019/20. The International Coffee Organization (ICO) on Aug 5 said it sees a 2019/20 global coffee deficit of -486,000 bags compared with a June projection for a surplus of +1.85 million bags. ICO also reported that global Oct-Jun coffee exports fell -5.1% y/y to 95.36 mln bags.
Demand optimism is another bullish factor for coffee. Keurig Dr Pepper said in its Q3 earnings report on July 30 that "significant growth in brewers and K-cup pods for at-home consumption more than offset a significant drop in the office coffee and hospitality businesses." The CEO of Starbucks July 29 said in a conference call that the company's U.S. comparable-store sales turned positive in July. Also, Fitch Solutions, on July 24, said consumer spending on coffee globally should rise +5.8% y/y in 2020, well above the 2015-2019 average of +1% y/y, as consumers will purchase more coffee for home consumption during the work-from-home pandemic. Still, there is concern about pandemic-related weakness in coffee demand.
In a potential bearish factor due to the threat of long liquidation pressure, funds boosted their net-long positions in ICE robusta coffee futures by 2,068 contracts to a 3-year high of 5,535 contracts in the week ended Aug 18, according to Friday's weekly Commitment of Traders (COT) report.
Big Picture Coffee Market Factors: World coffee production in 2019/20 (Oct/Sep) will fall -2.9% y/y to 168.006 mln bags with global consumption +0.3% y/y at a record 168.492 mln bags (ICO). The world coffee surplus/deficit in 2019/20 will turn to a deficit of -486,000 bags from a surplus of +5.136 mln bags in 2018/19 (ICO). Brazil 2019 coffee exports were a record 36.2 mln bags.
« Back to index