Thursday 29 September 2022

Coffee prices rally on tighter supply, lower crop prospects

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MILAN – Coffee futures prices rallied this week to reach new highs on both market. The Ice Arabica contract for September delivery has posted a 1,450-point gain (+6.9%) since the beginning of the week to reach a one-month high of 223.95 cents on Thursday. Similarly, September ICE Robusta coffee was $143 up (+6.9%) to a new high of $2,216, the highest level for the benchmark since March.

Dry weather in Brazil and a weaker dollar pushed prices higher in New York. Somar Meteorologia reported Monday that Minas Gerais received no rain last week. Rural Clima on Monday predicted some rain in Brazil for this week.

Meanwhile, ICE-Arabica certified stocks on Thursday fell to a new 23-year low of 571,905, the lowest level since 1999.

Domestic coffee prices in Vietnam, the world’s top Robusta producer, rose this week amid tightened bean supplies, with exporters saying they had been struggling to buy beans for the past few months.

In a note, Citi cut its estimate for Vietnam’s coffee crop in 2021/22 and 2022/23 by 1 and 2 million bags respectively. The group pointed at a crop survey saying the cherry development has suffered from a lack of fertilizer use this year.

Brazil’s coffee exports were 14.9% in July reports Cecafé in its monthly figures. Robusta shipments dropped sharply (-64.8%) to as little as 144,625 bags.

On the other hand, Rabobank said in a note that Brazilian roasters are buying most of local robustas to cut costs for their blends, hurting Brazil robusta exports that are 60% below the previous season.

The analysts Safras & Mercado have reported than an estimated total 89% of the new Brazil coffee crop has already been harvested based on their production forecast of 61.10 million bags.

The Brazilian National Statistics Agency IBGE – an institution of the Federal Government under the Ministry of Planning, Budget and Management – has revised slightly upwards its estimate for the current July 2022 to June 2023 Brazil coffee crop to 53.20 million bags of which 35.10 million of Arabica, up 9.6% on year, and 18.10 million of Robusta, up 6.8% from last year.

The IBGE is traditionally very conservative and its figures and are usually considered to be between 5% and 10% below reality.

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