VOT Research Desk

Market Analytics and Technical Considerations

Fundamentals

Friday’s closing prices for December arabica coffee (KCZ22) and January ICE robusta coffee (RMF23) were down by -7 (-0.39%).

Friday’s close for Arabica coffee prices was lower than Thursday’s 16-month nearest-futures low.  about global demand from weaker U.S. economic data and rising Covid rates in China pushed down coffee prices once more. Additionally, the Green Coffee Association reported on Tuesday that U.S. green coffee inventories increased by 5.8% year-over-year to 6,320,157 million bags in October.

The Brazilian real (USDBRL) rose +1.0% on Friday, partially recovering from its 10-month low on Thursday, which served as a support for coffee prices. Brazil’s coffee farmers are reluctant to sell their products for export as a result of Friday’s modest real recovery.

Arabica espresso has fundamental help from Monday’s report from Somar Meteorologia that showed Brazil’s Minas Gerais locale got 20.6 mm of downpour last week, or just 44% of the verifiable normal. About thirty percent of Brazil’s arabica crop is produced in Minas Gerais.After  

World Weather recently stated that a “pretty good environment” had been created for Brazil’s coffee crop in 2023/24, there is some reason for optimism regarding the outlook for Brazil’s longer-term coffee crop. However, Cooxupe, Brazil’s largest arabica coffee cooperative, stated that the sluggish growth of Brazil’s new coffee crop will likely result in a harvest similar to this year’s.

Coffee prices are supported fundamentally by low inventories. Thursday, 8,743 bags of ICE robusta coffee fell to a 4-year low.On October 28, ICE’s arabica coffee inventory fell to a 23-year low of 384,795 bags. However, inventory levels have since risen to an 8-week high on Wednesday.

The International Coffee Organization (ICO) reported on Monday that global coffee exports decreased by -0.4% year-over-year to 129 million bags during the months of October through September, supporting coffee prices. Additionally, Colombia’s October coffee exports decreased by 5% year-over-year to 942,000 bags, as reported on November 4 by the Colombia Coffee Growers Federation. The second-largest producer of arabica beans in the world is Colombia.

Additionally, Brazil’s green coffee exports in October decreased by -2.9% year-over-year to 3.18 million bags, according to Cecafe’s Thursday report. However, Vietnam exported 1.73 MMT of coffee in the 2021/22 season that began on September 30—a four-year high—according to a report issued on October 7 by the General Department of

Customs. Vietnam produces the most robusta coffee beans in the world.

As adverse weather reduced coffee yields, Brazil’s crop agency Conab reduced its 2022 Brazil coffee production estimate to 50.4 million bags on September 20 from 53.4 million bags in May.The Brazilian biennial coffee crop was supposed to produce more coffee this year, but drought reduced production.

The USDA’s prediction in its biannual report, which was made public on June 23, that Brazil’s arabica crop would enter the on-year of the biennial production cycle in 2022/23 would lead to an increase in global coffee production of +4.7% y/y to 174.95 million bags is a bearish factor. The USDA predicts that global coffee ending stocks will rise by 6.3% annually to 34.704 million bags in 2022/23.

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