Conab also raised its 2021 Brazil robusta coffee production estimate to a record 16.3 mln bags from a Sep forecast of 16.1 mln bags. Conab raised its total Brazil 2021 coffee production estimate to 47.7 mln bags from 46.9 mln bags estimated in Sep.
Coffee prices on Friday were also undercut by dollar strength and concern about the spreading omicron variant.
Arabica coffee has support as below-normal rain in Brazil may further stress Brazil's coffee crop. Somar Meteorologia reported Monday that Minas Gerais, a region that accounts for about 30% of Brazil's arabica coffee crop, received 33.8 mm of rain or only 45% of the historical average last week. The all-important flowering period for Brazilian coffee trees began in October, and insufficient rain may reduce coffee tree flowering and lead to smaller coffee yields.
Tight robusta supplies from Vietnam are a bullish factor for prices. Vietnam Jan-Nov coffee exports are down -4.4% y/y at 1.4 MMT. Also, the USDA's FAS cut its Vietnam 2021/22 coffee export estimate to 25.8 mln bags from 28.8 mln bags due to surging freight costs and reduced availability of shipping containers. Vietnam is the world's biggest robusta producer.
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Arabica coffee prices are seeing support from expectations of lower global supplies due to unfavorable weather and supply chain disruptions. Drought and recent frost events have devastated Brazil's coffee crops. Conab said Thursday that Brazil 2021 arabica coffee production fell to 31.4 mln bags, down -36% from 48.8 mln bags in 2020. The USDA's FAS projects that Brazil's 2021/22 coffee exports would tumble -27% y/y to 33.2 mln bags from a record 45.67 mln bags in 2020/21 as drought and frosts curbed coffee production.
Also, the USDA recently cut its Colombia 2021/22 coffee production estimate to 13.8 mln bags from a prior estimate of 14.1 mln bags, citing "potentially heavy rains from La Nina." FAS also cut its Colombia 2020/21 coffee production estimate to 13.4 mln bags from 14.3 mln bags, citing "supply chain disruption and lower yields from adverse weather conditions." The CEO of Colombia's National Federation of Coffee Growers said Tuesday that Colombian coffee production in 2022 may fall -7.1% y/y to 13 mln bags after heavy rain damaged crops. Colombia is the world's second-largest arabica coffee producer.
A bearish factor for coffee prices is concern that the rapid spread of the new omicron Covid variant will lead to global lockdowns and travel restrictions that close coffee shops and curb coffee demand. Israel and Japan have already closed their borders to foreign visitors, and other countries have imposed travel restrictions. A study by a Japanese scientist shows the omicron variant is more than four times transmissible than the delta variant.
The International Coffee Organization (ICO) on Oct 7 cut its global 2021/21 coffee surplus estimate to 2.39 mln bags from 2.63 mln bags and raised its global coffee consumption estimate to 167.26 mln bags from 167.01 mln bags. Global 2020/21 coffee exports (Oct-Sep) rose +1.2% y/y to 128.931 mln bags.
ICE arabica coffee inventories on July 28 rose to a 1-3/4 year high of 2.190 mln bags, recovering further from the 21-year low of 1.096 mln bags posted in October of 2020. However, supplies have since fallen as some South American coffee producers have defaulted on contracts, spurring buyers to turn to ICE-certified coffee stockpiles to meet their needs. Arabica ICE-monitored coffee inventories fell to a 10-3/4 month low Thursday. ICE-monitored robusta coffee inventories on May 20 climbed to a 4-year high of 16,017 lots but have since fallen to a 3-year low of 10,191 lots Thursday.
Big Picture Coffee Market Factors: World coffee production in 2020/21 (Oct/Sep) will rise +0.4% y/y to 169.64 mln bags, with global consumption up +1.9% y/y at 167.26 mln bags (ICO). The world coffee surplus/deficit in 2020/21 will shrink to a surplus of +2.39 mln bags from a surplus of +4.85 mln bags in 2019/20 (ICO). Total Brazil 2020/21 coffee exports rose +13.3% y/y to a record 45.6 mln bags (CeCafe). ICO data shows global 2020/21 coffee exports (Oct-Sep) rose +1.2% y/y to 128.931 mln bags.
