Robusta Coffee 10-T Jan ’20 (RMF20) 1,341s +9 (+0.68%) 09/27/19 [ICE]
Dec arabica coffee (KCZ19) on Friday closed up +0.05 (+0.05%), and Jan ICE robusta coffee (DFF0) closed up +9 (+0.68%).
Coffee prices moved slightly higher Friday as they consolidated above Wednesday’s 2-1/2 week low. Arabica coffee price dropped to that 2-1/2 week low on weakness in the Brazilian real which tumbled to a 1-year low against the dollar on Wednesday.
A weaker real encourages export selling by Brazil’s coffee producers. Brazil coffee crop concerns are supportive for coffee prices after World Weather on Wednesday said parts of Minas Gerais, Brazil’s largest arabica-coffee growing region, received only 50% of normal rainfall in the past month. Coffee prices still have underlying support from last Tuesday’s news that Brazil’s government forecasting agency, Conab, cut its Brazil 2019 coffee production estimate to 49 mln bags from a previous estimate of 50.9 mln bags as adverse weather cut coffee yields.
Supplies have tightened after ICE-monitored arabica coffee inventories fell to a 1-year low Thursday of 2.284 mln bags. Last Friday’s weekly Commitment of Traders (COT) data showed that funds increased their net-short robusta coffee positions by 1,923 contracts in the week of Sep 17 to a record 47,357 contracts, the most since data began in 2011, which could provide fuel for a short-covering rally.
Robust supplies are also undercutting coffee prices. The Green Coffee Association last Monday reported U.S. Aug green coffee inventories rose +1.8% m/m and +8.4% y/y to 7.224 mln bags. Also, the International Coffee Organization (ICO) on Sep 10 reported that global 2018-19 coffee exports during Oct-Jul rose +10% y/y to 109.4 mln bags. ICO on Sep 11 also raised its global 2018/19 coffee surplus estimate to 4.96 mln bags from an August estimate of 3.92 mln bags. A supportive factor for robusta coffee was data Sep 11 from Vietnam’s General Department of Vietnam Customs that showed Vietnam Aug coffee exports fell -18.7% m/m and -25.4% y/y to 114,162 MT, and cumulative Jan-Aug coffee exports are down by -11.5% y/y to 1.17 MMT. Vietnam is the world’s largest producer of robusta beans.
Big Picture Coffee Market Factors: World coffee production (Oct/Sep) in 2018/19 will climb +3.9% y/y to a record 169.727 mln bags with global consumption +2.1% y/y to 164.769 mln bags (ICO). The world coffee surplus in 2018/19 will climb to 4.958 mln bags from a 2017/18 surplus of 2.046 mln bags (ICO). USDA projects global 2018/19 coffee production will climb +7.1% y/y to a record 171.166 mln bags and global 2018/19 coffee ending stocks will increase by +11.6% to a 3-year high of 32.812 mln bags. Source: Barchart.com