• Arabica coffee rose 1.9% on the week in New York, closing at US₵ 222.35/lb
• On the London exchange, Robusta coffee prices rose 2.4% to USD 3987/t
• Dollar up 1.5% to USDBRL 5.24 for the week
• Cepea indicator for Arabica coffee rises 4.2% to BRL 1286.07/bag
• Cepea indicator for Robusta coffee up 6.8% to BRL 1149.20/bag
• NOAA points to weak La Niña in the second half of the year
• Vietnam's Ministry of Agriculture projects 20% drop in production
• Coffee stocks in European ports fell 37% year-on-year in April
• USDA projects Vietnam's production virtually unchanged at 29 million bags
• Brazilian production expected to rise to 69.9 million bags according to USDA
Last week, Arabica and Robusta coffee futures prices rose again amid greater appetite from speculators amid the scenario of reduced supply of Robusta in Asia. At the beginning of the week, the news that the Vietnamese Ministry of Agriculture had projected a 20% drop in the country's production for the next season acted as a bullish factor. However, the release of more optimistic data by the USDA on Thursday afternoon (30) acted in a bearish way for prices in Friday's session (31), as will be discussed below. The USDA projected the country's production at 29 million bags in 2024/25, almost unchanged compared to the current season.
In New York, the most active contract, expiring in July, ended the week up 410 points (+1.9%), closing Friday (31) at US₵ 222.35/lb. At the London terminal, Robusta coffee futures rose by USD 95/t (+2.4%), closing Friday at USD 3987/t. In the same period, the dollar index fell 0.1% to 104.57 points and the USDBRL pair climbed 1.5% to 5.24.
Weekly intraday (most active contract) - May 28 to May 31
On the Brazilian domestic market, coffee prices followed the trend seen abroad and ended the week higher. The Cepea indicator for Arabica rose by 4.2% to BRL 1286.07/bag. The indicator for Robusta climbed 6.8% to BRL 1149.20/bag. The more intense rise in the domestic market was a reflection of the dollar's increase during the week.
In the coming weeks, the market will keep an eye on the release of Brazilian export data by Cecafé and on weather conditions both in Brazil and abroad. The coming of winter in Brazil and the possibility of cold waves could provide some support for prices, considering the memory of the 2021 frost, and generate greater volatility. In Vietnam, continued adequate weather is essential for the development of the country's 2024/25 crop. In addition, NOAA models continue to point to the return of La Niña in the second half of the year, which would not have severe impacts since the models point to a weak phenomenon, however, if it is strong, the arrival of rains in the coffee belt could be delayed.
The latest update from the US agency NOAA indicated a 49% probability of La Niña returning from the A-S-O quarter (August, September and October) and above 60% from the O-N-D quarter (October, November and December). In terms of intensity, the models point to a phenomenon of weak intensity throughout the second half of the year.
Probabilistic forecasts of La Niña/El Niño and projected variations in the Pacific Ocean's surface temperature (in ºC)
Source: IRI/CPC, NOAA. Design: StoneX.
ECF data points to falling stocks in European ports
Last week saw the release of data from the European Coffee Federation (ECF) indicating coffee stocks in the European ports of Antwerp, Hamburg, Le Havre, Barcelona, Trieste, Genoa, Napoli, Tallinn, London, Felix Stowe and Bremen (partially) in March and April. According to the report, stocks totaled 6.4 million bags in March, down 42% year-on-year and 4.4% compared to the previous month.
In April, stocks rose 10.6% to 7 million bags compared to March, but were still down 37% in comparison to April 2023. Of these, 31.8% of stocks were made up of Robusta coffee, 28.2% of natural Arabica and 40% of washed Arabica.
Em abril, os estoques avançaram 10,6% para 7 milhões de sacas se comparado com março, mas ainda contabilizavam uma queda de 37% se comparado com abril de 2023. Destes, 31,8% dos estoques eram compostos de café robusta, 28,2% de café arábica natural e 40% de café arábica lavado.
USDA: Vietnamese coffee production to reach 29 million bags in 2024/25
Last week, the USDA released its attaché report for Vietnam, adjusting its projection for 2023/24 production and the expectation for 2024/25. According to the department, coffee production in 2023/24 was 29.1 million bags, 5.8% higher than the previous projection of 27.5 million bags. For the 2024/25 season, the organization projects a practically stable output of 29 million bags. According to the report, the planted area should remain stable over the next few years, even as farmers diversify with new crops.
Some producers have invested in durian and passion fruit production due to the higher profitability compared to coffee. However, rising prices have encouraged producers to invest in coffee crops. Also according to the report, by growing durian, producers can earn twice as much as coffee. Furthermore, while the weather has been unfavorable for the country's production, the use of irrigation systems has partially mitigated the effects of the climate.
Although the report gives a substantially optimistic outlook for the country's production, there is no consensus among market participants that Vietnamese production could reach such a volume. As reported last week, Volcafe, for example, put its estimate for the country's production at 24 million bags. Some players are not as pessimistic as Volcafe, but they do not agree with the USDA's optimism either. Given the scenario of reduced supply of Robusta coffee, the development of production there, whose harvest begins in mid-November, should be closely monitored.
With regard to consumption, the report adjusted its projection for 2023/24 by 7.8% to 3.45 million bags. For 2024/25, the department points to a growth of 4.3% to 3.6 million bags. The strong growth in consumption would be associated with a coffee culture, the country's economic growth, and the fact that coffee is more affordable than other drinks. The report also highlights the fact that the country's economy grew by 5.6% in the first quarter of 2024.
As for exports, the USDA increased its projection for exports in 2023/24 by 7.4%, which are expected to reach 26.85 million bags. For 2024/25, shipments are expected to fall slightly by 1.3% to 26.5 million bags. Ending stocks should remain stable at 492,000 bags.
USDA: Brazilian production expected to rise to 69.9 million bags
The U.S. Department of Agriculture (USDA) released on Monday its attaché report with projections for Brazilian production in 2024/25. According to the department, Brazilian coffee production is expected to rise by 5.4% to 69.9 million bags next season. According to the report, the increase in production is a reflection of favorable weather conditions following a period of drought and extreme heat. Robusta coffee production is expected to rise by 1.4% to 21.7 million bags, while Arabica output is expected to rise by a further 7.3% to 48.2 million bags.
With regard to exports, the USDA adjusted its projections for the 2023/24 season by 3.9%, which puts the volume at 45.55 million bags. For the 2024/25 season, the country's exports are expected to rise by 2.4% to 46.65 million bags. For consumption, the report points to a growth of just 0.5% next season to 22.67 million bags, of which 21.7 million bags will be roasted and ground coffee and 970,000 bags of soluble coffee. Also according to the report, ending stocks are expected to rise by 22.7% to 3.54 million bags.
With the release of the two main global producers and exporters, the aggregate of all countries released so far was a downward adjustment for the 2023/24 season, going from 143.9 million bags in the previous estimates to 142 million in the current revision. On the other hand, last season's revision helped raise the estimated increase for the next crop year. In 2024/25, the USDA's partial data points to production of 149.4 million bags, an annual increase of 5.2%. Exports in 2023/24 have been revised by 0.1% so far, standing at 114 million bags, with shipments rising by 3.2% in 2024/25, to 117.6 million bags.
In general, the results confirm what has been discussed for some weeks about market participants' perception of a global balance likely to be in surplus in 2024/25. The surplus balance expected by agents is based mainly on a strong production performance from Arabica coffee, while Robusta still faces greater doubts.
The USDA's outlook for the main Robusta producers projects a significant recovery in the coming crop year. This should continue to be the main question mark in the market and may be revised downwards in the future, but it tends to provide a ceiling for the recent gains in prices on the exchange.
US estimates
Source: USDA. Design: StoneX.
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