With Arabica plunging to a 13-year nearest-future peak, the cost of coffee settled significantly higher. Moreover, Coffee prices reached the crucial overextension level, from where a decent downside recovery is pending.
Why Coffee Price Moved Higher
On Wednesday, fund purchases of coffee futures were driven by worries about longer-term crop damage from the Brazilian drought situation. Since April, Brazil's rainfall has been continuously below average, harming coffee plants during the crucial phase of flowering and decreasing the country's chances of producing an Arabica coffee harvest in 2025–2026.
According to Cemaden, a natural disaster tracking center, Brazil has been experiencing its driest weather since 1981.
Coffee Prices: Key Fundamental Releases
Following the announcement last Monday by the General Department of Customs of Vietnam that the country's October coffee exports dropped 11.6% month over month to 45,412 MT, and its January-October coffee exports fell 11.1% year over year to 1.15 MMT, robusta prices are being supported by rigid robusta supplies.
Another factor supporting robusta coffee is concerns that heavy rains in Vietnam may flood coffee fields and postpone the country's coffee harvest. Vietnam, the largest producer of robusta in the world, is just beginning its coffee harvest.
Decreased robusta production supports robusta coffee cost. On March 26, Vietnam's agricultural ministry announced that the country's drought-related coffee cultivation in the 2023–2024 crop year fell by -20% to 1.472 MMT, the lowest amount in four years.
Vietnam's robusta coffee cultivation is expected to decrease slightly to 27.9 million sacks in the upcoming marketing calendar year of 2024/25 from 28 million sacks in the 2023/24 season, according to a USDA FAS projection released on May 31.
Coffee Prices Projection: Key Events To Look At
Conab, Brazil's crop predicting agency, reduced its 2024 Brazil coffee farming projection on September 19 from May's estimate of 58.8 million bags to 54.8 million bags, which helped to boost coffee prices.
Recent downpours in Brazil momentarily alleviated concerns about dryness. Rainfall in Minas Gerais, Brazil's largest arabica coffee-growing region, was 60.9 mm last week, 127% of the past average, according to a report by Somar Meteorologia. Minas Gerais is Brazil's largest producer of arabica coffee.
Given that the International Coffee Organization (ICO) stated on November 8 that global coffee exports in September increased +25% year-over-year to 10.76 million bags and that shipments from October to September increased +11.7% year-over-year to 137.27 million bags, indications of a larger global supply of coffee are negative for prices.
