Arabica coffee futures traded around $1.25 per lb in the last week of January, not far from a 4-month high of $1.317 per lb touched early this month, amid persistent concerns over supply from the biggest producer Brazil. Output in Brazil is set to decline sharply amid hot and dry weather and as arabica trees enter the lower-yielding half of a biennial cycle. Meanwhile, new fresh lockdowns and other restrictive measures around the world to fight COVID-19 pandemic meant that the demand from coffee shops and other foodservice operations was still at very low levels.
Arabica coffee it is the world benchmark for coffee futures contracts that trade on the Inter Continental Exchange (ICE). Arabica accounts for 75 percent of the world’s production and is mostly cultivated in Brazil (40% of the world’s total supply) and Colombia. Robusta account for the remaining 25% and is mostly produced in Vietnam (15% of global supply) and Indonesia. Other major exporters include: Peru, India, Uganda, Ethiopia, Mexico and Cote Ivoire. Robusta is the coffee bean that is popular in Europe and espresso coffees while Arabica beans are popular in the United States.
The chart that shows the ten year price fluctuation indicates that the highest price was recorded on April 1, 2011 when the half a pound Arabica was traded at $2.93. The lowest closing price for the decade was April 1, 2019 at $0.90.
Arabica Closes At a two week low on forecasts for rain in Brazil and weakness in the Brazilian Real.
Coffee prices on Friday settled mixed with Arabica falling to a 2-week low. The outlook for rain in Brazil, along with weakness in the Brazilian real against the dollar, weighed on Arabica prices on Friday. Heavy rain is forecast over the coming week for Minas Gerais, Brazil's largest Arabica coffee-growing region, which should benefit Brazil's coffee crops in short term and is negative for prices. Also, the Brazilian real fell to a 2-1/2 week low Friday against the dollar, which encourages export selling from Brazil's coffee producers.
Robusta rose slightly on Friday and garnered support on reduced Vietnam coffee supplies after the Vietnam General Statistics Office late Thursday reported Vietnam Jan coffee exports dropped -17.6% y/y to 120,000 MT.
A rebound in ICE coffee inventories is bearish for coffee prices. ICE coffee inventories have been trending higher over the past 3 months. ICE Arabica coffee inventories on Thursday rose to a 6-1/2 month high of 1.619 mln bags, recovering further from the 20-3/4 year low of 1.096 mln bags posted on October 5. Also, ICE-monitored Robusta coffee inventories climbed to a 9-1/2 month high Wednesday, rebounding from the 2-year low of 10,808 lots posted on October 14.
Coffee prices are consolidating below their highs from January 15 when Arabica posted a 4-1/2 month high and Robusta posted a 3-week high. Coffee has support after Conab, Brazil's national agricultural statistics agency, forecast last Thursday that Brazil’s 2021 Arabica coffee production will slump -35.7% y/y to a 12-year low of 31.35 mln bags. Conab said coffee output would fall as Brazil's coffee trees are in the lower-yielding half of a biennial cycle and that the long term insufficient rain in key stages of crop development is exacerbating the decline in yields.
Robusta coffee has support from last Tuesday's projection from the Vietnam National Coffee Association that Vietnam coffee production will drop -10% to -15% this year due to natural disasters and lower investment resulting from low prices. Vietnam is the world's biggest producer of Robusta coffee.
Robusta prices have a negative carry-over from Conab's forecast last Thursday that Brazil's 2021 Robusta coffee production will increase as much as 16% y/y to 16.6 million bags.
A bearish factor for coffee was last Tuesday's projection from Brazil's coffee cooperative Cooxupe that it expects Brazil's 2021 Arabica exports to jump +20% y/y to a record 6 mln bags.