Tuesday 21 March 2023

Arabica prices rebound on lower exports, weather news

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MILAN – Arabica coffee futures rebounded on Monday from last week’s lows on fresh export data from the International Coffee Organization and slightly bad weather news from Brazil. The main contract for December delivery gained 790 points, or 4.65%, to close at 177.70 cents. The “C” contract lost 11% last week on improving crop outlook in Brazil and concerns over demand to a 15-month low of 169.80 cents, but some dealers believed the fall was overdone and expected a price correction.

In London, the contract for November delivery rose $6 to $1,877. According to ICO’s monthly data, world coffee exports amounted to 9.95 million bags in September 2022, compared with 10.26 million in September 2021, a 3% decrease over year.

Exports in coffee year 2021/22 (October/21 to September/22) were slightly down (-0.4%) to 129 million bags compared with 129.5 million bags in coffee year 2020/21.

Exports of Arabica totaled 80.63 million bags compared with 82.55 million bags last year, or a 2.3% decrease over year. Robusta exports rose to 48.35 million bags compared with 46.97 million bags for the previous year, or a 2.9% increase.

Arabica prices also found support from renewed weather concerns in Brazil, Somar Meteorologia reported that Minas Gerais had 28.9 mm of rain last week, or only 79% of the historical average. In addition to that, certified stocks as of October 31st are still at a 23-year low of 384,795 bags.

The Safras survey indicates that until October 18, sales of the 22/23 crop in Brazil reached 60% of the expected production.

The 8% increase of 8 percentage points in relation to the previous month is much more linked to a downward revision in the size of the crop than to a more intense flow of new sales, reports Safras.

Arabica sales reached 58% of the total crop, with growers lengthening positions and being more focused on deliveries.

Conillon sales reach 64% of the crop, mainly from the domestic roasted and ground industry. The sales flow continues well below the same period last year, when it was at 73% of production and slightly above the 5-year average for the period (63%).

Safras revised its estimate for the 2022/23 crop to 57.30 mln bags. The analyst projects coffee shipments for the 22/23 season at slightly over 36 mln bags. Down 6% from the previous season.

Besides the decline in exports, stocks at the end of the season must fall to something around 2 mln bags, remaining at very low levels.

The insecurity regarding domestic supply explains the more aggressive posture of the domestic roasted and ground industry, especially in the purchase of conillon coffee.

This tightness in the current season requires a full crop in Brazil next season for the resumption of stocks and the recovery of the international market share, concludes Safras.

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