Coffee Prices Settle Moderately Higher At 1-Week Highs On Brazil Crop Concerns - 11 Aug 2021

Sep arabica coffee (KCU21) on Tuesday closed up +2.65 (+1.48%), and Sep ICE Robusta coffee (RMU21) closed up +73 (+4.09%).

Coffee prices on Tuesday rallied to 1-week highs and settled moderately higher on continued coffee crop concerns in Brazil.  Somar Meteorologia said on Monday that dry conditions and warmer temperatures are seen stressing Brazil's coffee crops over the next two weeks.  Somar says that soil moisture levels may decline further from already critical levels as water availability in the soil in Minas Gerais is below 10% when the minimum level for crop development is 60%.

Somar Meteorologia also reported Monday that rainfall in Minas Gerais measured 0.8 mm in the past week, only 11% of the historical average.  The all-important flowering period for Brazilian coffee trees begins next month, and a lack of rain may reduce coffee tree flowering and further curb coffee yields.

The recent frosts in Brazil damaged coffee trees.  Surveys conducted by the government of Minas Gerais found that last month's frosts reached 194 municipalities, and more than 80% were impacted in some way.  RR Consultants Rural said last Tuesday said that abrupt swings in temperatures over the past 30 days in Brazil triggered severe defoliation on trees in arabica coffee growing areas.

Robusta coffee has support from reduced robusta coffee supplies from Vietnam, the world's largest robusta producer.  A shortage of shipping containers in Asia has limited Vietnam's robusta coffee exports.  Vietnam's General Statistics Office reported July 28 that Vietnam's cumulative Jan-Jul coffee exports fell -9.3% y/y to 953,000 MT.  Also, the ICO reported July 13 that global robusta Oct-May coffee exports are down -4.2% y/y at 31.435 mln bags.

A bearish factor for arabica is increased supplies from Colombia, the world's second-largest producer of arabica beans.  The Colombia Coffee Growers Federation reported last Wednesday that Colombia July coffee exports rose +9% y/y to 1.229 mln bags.

In a bearish factor, the International Coffee Organization (ICO) on July 5 raised its 2020-2021 coffee surplus estimate by +12% to 2.26 million bags from its previous estimate of 2.02 million bags.  Also, the ICO reported July 13 that total global coffee exports from Oct-May rose +2.2% y/y to 87.299 mln bags.

Brazil's crop agency Conab on May 25 projected that 2021 Brazil coffee production would fall -23% y/y to a 4-year low of 48.8 mln bags.  Conab said coffee output would fall since Brazil's coffee trees are in the lower-yielding half of a biennial cycle and since drought conditions in key stages of crop development exacerbated a decline in yields.  

ICE arabica coffee inventories on July 28 rose to a 1-1/2 year high of 2.190 mln bags, recovering further from the 21-year low of 1.096 mln bags posted on October 5.  ICE-monitored robusta coffee inventories on May 20 climbed to a 3-3/4 year high of 16,017 lots but have since fallen to a 6-month low of 14,242 lots on Tuesday.

Source: Rich Asplund - Barchart - Tue Aug 10, 1:51PM CDT

Author: Vietnam Global Trading Limited

11 Aug 2021