On Tuesday, coffee prices posted an uptrend on concern about lower coffee yields in top producer Brazil amid the persistent dry conditions.
Arabica futures rocketed 8.25% or 20.35 points to $266.90 per pound. At the same time, robusta contracts soared 3.90% or 75.00 points to $1,998.00 per metric pound.
Meteorologists reported that Minas Gerais received 0.50 mm of rain last week, representing only 12.00% of the historical average. The region accounts for about 30.00% of Brazil’s arabica crop.
Moreover, the tightness in ICE coffee inventories also supported the current movement of the bean. Accordingly, the agency reported that the current stocks skidded to a new 22-year low of 740,167 bags.
In addition, Brazilian coffee farmers harvested 59.00% of the 2022/23 crop as of July 12. However, the figure came in lower than the five-year average of 65.00%.
At the same time, arabica prices benefitted from the strength of the Brazilian real. Subsequently, the BRL stepped higher to a one-week high against the greenback, discouraging export selling from local producers.
Meanwhile, robusta coffee gained ground from the latest outlook released by Vicofa, Vietnam’s main bean association. The guidance stated that 2022/23 production might drop as much as 7.00% after bad weather curbed yields.
What are the bearish factors for coffee?
Accordingly, abundant coffee supplies are significantly bearish for prices. Last month, Vietnam reported that June bean exports increased 13.30% year-over-year to 145,000 metric tons. In addition, the country remains the world’s biggest producer of robusta beans.
On July 06, Cecafe published that Brazil’s June annual exports accelerated by 0.60% to 2.79 million bags. The International Coffee Organization also reported that global 2022 exports for Oct-May were up 1.30% at 88.51 million bags.
Additionally, Colombia Coffee Growers Federation stated an increase of 6.00% to 939,000 bags in annual exports. The state is the world’s second-largest producer of arabica beans, after Brazil.