On Monday, coffee futures hiked on signs of tight supplies after ICE monitored inventories slumped to a new 22-year low.
Arabica contracts soared 4.73% or 10.30 points to $228.05 per pound, extending the previous 4.82% surge.
The International Coffee Exchange reported 931,591 bags of stocks on Tuesday, the lowest level since 2000.
Moreover, the lingering concern that excessive dryness in Brazil may lead to lower yields has supported the futures. On Monday, Minas Gerais, which holds about 30.00% of Brazil’s bean output, only received 4.00% of the historical rain average.
In addition, the slower pace of coffee harvest in top arabica producers gave a bullish push to the soft commodity. As of June 21, the reaping was only 35.00% completed, well below the five-year average of 44.00%.
Another supportive factor for coffee prices is the smaller output in Colombia, the world’s second-largest arabica producer. The country reported that January to May production was down 4.00% year-over-year to 4.50 million bags.
Furthermore, robusta futures added 1.59% or 32.00 points to $2,049.00 per metric ton. Nevertheless, the contracts are still under pressure from the abundant supplies of top grower Vietnam.
Green coffee inventories rose in May
Meanwhile, larger US bean supplies are bearish for prices. Recently, the Green Coffee Association cited that inventories increased by 1.60% in May. The report also posted a 3.20% annual gain to 6.00 million bags.
Additionally, the weak Brazilian real poses another bearish factor for bean prices, encouraging export selling by local coffee producers. The BRL slid to a new 4-1/2 month low against the US dollar.
Nevertheless, the International Coffee Organization recently slashed its global 2020/21 supply estimate to a 3.13 million bags deficit. This outlook is notably smaller than the precursory estimate of a 1.20 million bag surplus.