• Arabica coffee rose 3% on the week in New York, closing at US₵ 206.6/lb
• On the London exchange, Robusta coffee prices rose 2% to USD 3518/t
• Dollar down 1% to USDBRL 5.10 on the week
• Cepea indicator for Arabica coffee rises 3% to BRL 1,155.64/bag
• Cepea indicator for Robusta coffee up 4% to BRL 977.21/bag
• Weather in Vietnam and harvest in Brazil are the focus of market attention
• Brazil exported 4.22 million bags of coffee in April (+53.3%)
• USDA: production to rise 0.3% in Costa Rica and 0.9% in El Salvador
• USDA reduces projection for Mexico by 23/24
• Indonesian production expected to recover 42% to 10.9 million bags
Considering the volatility seen in previous weeks, prices last week can be considered relatively stable, while technical factors and speculative agents predominated, with a practically unchanged scenario in the field of fundamentals. In New York, the most active contract ended the week with gains of 3%, closing Friday (17) quoted at US₵ 206.6/lb. In London, prices followed a similar trend, closing the week up 2% to USD 3518/t.
On the Brazilian domestic market, prices followed the movements seen abroad and ended the week with gains. The Cepea indicator for Arabica coffee was up 3% on the week, closing Friday (17) at BRL 1,155.64/bag. For Robusta coffee, the indicator pointed to a slightly higher increase of 4%, to BRL 977.21/bag. During this period, the dollar fell by 1% to USDBRL 5.10.
Weekly intraday (most active contract) - May 13 to May 17
In terms of fundamentals, the focus of market participants continues to be on the weather conditions in Vietnam, the start of the harvest in Brazil, and the release of USDA reports on country production. As will be discussed below, last week the USDA released production reports for Costa Rica, El Salvador, Indonesia and Mexico. In addition to these factors, the weather in the Brazilian winter and the prospect of La Niña returning in the second half of the year are also being closely monitored by agents.
With regard to the weather in Vietnam, as we have reported in recent weeks, the rains have returned to the country's coffee belt. However, despite volumes of up to 200 mm in some regions, some parts of the country still have an accumulated rainfall in the last 30 days that is below the historical average for the period, which indicates that more significant volumes of rain are needed to ensure the proper development of the country's crop. For the next few days, the models have pointed to good accumulated volumes of rain in practically the entire Asian country.
Accumulated rainfall over the last 30 days compared to the historical average (%) and accumulated rainfall forecast for the next 14 days
Source: StoneX, with data from NOAA/NCEP/EMC (GFS: Global Forecast System), 2024.
With regard to the harvest in Brazil, as usual, the pace of harvesting in the Robusta coffee regions, especially in the state of Rondônia, is more advanced than in the Arabica regions. There are several reports that the first batches of the new crop are showing a smaller sieve and lower quality. In addition, some producers in Espírito Santo and Bahia have reported that yields are lower than expected. Although it is too early to say that there are serious problems with Brazil's new crop, this remains a point of attention for the coming weeks.
Last week, the Brazilian Coffee Exporters Council (Cecafé) released its April export report. According to the council, Brazil exported 4.22 million bags in April, which represents an increase of 53.3% compared to the same month in 2023. Of these, there were almost 677,000 bags of Robusta coffee (+445%), 3.22 million bags of Arabica coffee (+40%), 1,900 bags of roasted and ground coffee (-56%) and 318,700 bags of soluble coffee (-1.8%). Export revenues totaled almost BRL 4.8 billion, 55.9% more than in April 2023. The strong increase in Brazilian coffee exports, especially for Robusta coffee, is a reflection of the reduced supply scenario in Asia and the greater competitiveness of Brazilian coffee.
Brazilian coffee exports (million bags)
Source. Cecafé. Design: StoneX.
As mentioned above, the USDA released the Attaché report with its estimates for production in some countries. For Costa Rica, the department projects a 0.3% increase in production in 2024/25, which should reach 1.185 million bags. Consumption should rise by 1.2% to 420,000 bags and exports are expected to total 975,000 bags (+0.3%). In El Salvador, production is expected to rise by 0.9% to 560,000 bags, consumption by 1.4% to 299,000 bags, and exports should reach 525,000 bags in 2024/25.
The USDA reduced its projection for Mexican coffee production in 2023/24 by 6%, from 4.09 to 3.86 million bags. For the 2024/25 season, the USDA projects the country's production at 3.89 million bags, up 0.9% compared to the previous crop. The country's consumption is expected to remain stable at 3.1 million bags. The country's exports are forecast to rise by 3.4% next season to 2.75 million bags. Also according to the USDA, Mexico's total coffee imports are expected to rise by 3.8% to 1.94 million bags. In 2023, Mexico was the 18th destination for Brazilian coffee exports, which totaled 616,000 bags more.
Along with the production problems in Vietnam, the sharp drop in Indonesian output last season was one of the main factors behind the increases in global Robusta coffee prices. In its latest report, the USDA has already indicated a strong recovery in the country's production in 2024/25, whose harvest is expected to start between May and June this year. For the 2023/24 season, the USDA reduced its estimate for the country's production by 21%, resulting in a 35% drop in the country's output last season to 7.65 million bags.
Robusta production suffered the most from the adverse weather, with the agency reducing its estimate for the variety by 25%, resulting in a 40% drop last season, from 10.5 in 2022/23 to 6.3 million bags of Robusta coffee in 2023/24. For 2024/25, the report justifies that favorable weather should result in a 42% recovery in Indonesian production, which should total 10.9 million bags, 87% of which will be Robusta. Coffee consumption should remain stable at 4.8 million bags and exports should recover by 32% to 7.05 million bags.
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