Wed, February 12, 2025

Coffee Prices Decline 1.90% and 2.03% in Mid-2024

Цены на кофе снижаются на 1,90% и 2,03% в середине 2024 года

Quick Look:

  • September arabica and robusta coffee prices fell by 1.90% and 2.03%, respectively.
  • Brazil’s coffee harvest is ahead of schedule, contributing to lower prices.
  • Dry weather in Brazil’s Minas Gerais region supports arabica prices but risks yield and quality.
  • Increased global coffee inventories exert downward price pressure.
  • Severe drought in Vietnam is expected to reduce robusta coffee production significantly.

Coffee enthusiasts and traders alike have witnessed a tumultuous ride in the coffee market this year. As of today, September arabica coffee (KCU24) is down by 4.45 points, translating to a 1.90% decline, while September ICE robusta coffee (RMU24) has dropped by 89 points, or 2.03%. Despite these drops, arabica coffee prices have stayed above the three-week low observed last Thursday, whereas robusta coffee has dipped to a fresh three-week low.

Harvest Pressures in Brazil

A significant factor contributing to the bearish trend in coffee prices is the rapid pace of the coffee harvest in Brazil. According to Safras & Mercado, Brazil’s 2024/25 coffee harvest was 81% complete by July 23. This is a noticeable acceleration compared to the 74% completion rate at the same time last year and the five-year average of 77%. Specifically, the arabica coffee harvest is 75% complete, significantly faster than the 65% recorded a year ago and the five-year average of 69%. The robusta coffee harvest is nearly finished, with 95% completion, surpassing last year’s 89% and the five-year average of 93%. As the world’s largest producer of arabica coffee, Brazil’s swift harvest pace is putting downward pressure on global coffee prices.

Weather Woes and Market Reactions

The weather, a perennial wild card in agricultural markets, plays a dual role in influencing coffee prices. The lack of rainfall in Brazil’s Minas Gerais region, a crucial area for about 30% of the country’s arabica crop, supports arabica prices. Last week, Somar Meteorologia reported no rain in this region, in stark contrast to the historical average of 2.6 mm for that week. This dry spell could affect the quality and yield of the arabica beans, keeping prices from falling further.

Rising Inventories and Price Pressures

However, rising coffee inventories are counteracting these weather concerns. ICE-monitored robusta coffee inventories have surged to a one-year high of 6,521 lots, a significant recovery from the record low of 1,958 in February 2024. Similarly, arabica coffee inventories have risen to a one-and-a-half-year high of 842,434 bags as of June 25, up from a 24-year low of 224,066 bags in November 2023. Though slightly lower at 814,801 bags last Thursday, these elevated inventory levels are a bearish factor for coffee prices.

Vietnam’s Struggles and Global Impact

On the other side of the globe, Vietnam, the largest producer of robusta coffee, is grappling with severe drought conditions. The lack of adequate rainfall has inflicted irreversible damage on coffee blossoms. Consequently, Volcafe predicts a significant drop in Vietnam’s 2024/25 robusta coffee crop to just 24 million bags, the lowest in 13 years. Additionally, Vietnam’s coffee production for the 2023/24 crop year is expected to decline by 20% to 1.472 million metric tonnes. This would mark the smallest crop in four years. As a result, Vietnam’s coffee exports are more likely to fall by 20% year-on-year to 1.336 million metric tonnes.

Global Coffee Dynamics

Despite regional challenges, global coffee export data presents a mixed picture. The International Coffee Organization (ICO) reported a 9.8% year-on-year increase in global coffee exports for May. Additionally, October-May exports rose 10.9% year-on-year, reaching 92.73 million bags. Brazil significantly contributed to this rise, with its 2023/24 coffee exports soaring by 33% year-on-year to a record 47.3 million bags.

Conversely, the ICO noted a 5.8% year-on-year increase in global coffee production for 2023/24, reaching 178 million bags. This growth, combined with a 2.2% rise in global coffee consumption to 177 million bags, results in a slight surplus of 1 million bags. The USDA’s bi-annual report further amplifies the bearish outlook, forecasting a 4.2% year-on-year increase in world coffee production to 176.235 million bags for 2024/25. Additionally, it predicts a 7.7% rise in ending stocks to 25.78 million bags.

Looking Ahead

As we navigate through 2024, many factors influence the coffee market, including harvest rates, weather conditions, inventory levels, and global production forecasts. Although the immediate outlook suggests some bearish trends, the ongoing weather patterns will be crucial in determining future price movements. Specifically, their impact on critical coffee-growing regions will play a significant role. Therefore, coffee traders and enthusiasts must closely watch localized weather reports and global market dynamics to make informed decisions. In this ever-evolving market, staying informed is essential for strategic planning.

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