September arabica coffee (KCU22) on Monday closed up +15.40 (+7.71%), and Sep ICE Robusta coffee (RMU22) closed up +69 (+3.59%). Coffee prices on Monday surged, with robusta climbing to a new 1-1/2 week high. Coffee prices rallied sharply on concern about lower coffee yields in Brazil after Somar Meteorologia reported Monday that Minas Gerais received 0.5 mm of rain last week, or 12% of the historical average. Minas Gerais accounts for about 30% of Brazil's arabica crop. Tightness in ICE coffee inventories is also supportive for arabica prices after ICE monitored arabica coffee inventories Monday dropped to a new 22-year low of 734,157 bags. Strength in the Brazilian real is supportive for coffee prices as the real (^USDBRL) climbed to a 1-week high against the dollar Monday. A stronger real discourages export selling from Brazil's coffee producers. Robusta coffee found support last Wednesday when Vicofa, Vietnam's main coffee association, said that Vietnam 2022/23 robusta production might drop as much as -7% after bad weather curbed coffee yields.
An increase in U.S. coffee supplies is bearish for prices and helped push arabica prices down to an 8-month low last Friday and robusta down to a 10-3/4 month low. The Green Coffee Association reported last Friday that U.S. Jun green coffee inventories rose +0.8% m/m and +4.7% y/y to a 10-month high of 6.05 million bags. Abundant robusta coffee supplies are bearish for prices. Vietnam's General Department of Customs reported in late June that Vietnam's June coffee exports were up +13.3% y/y at 145,000 MT, and Jan-Jun coffee exports rose +21.7% y/y to 1.027 MMT. Vietnam is the world's biggest producer of robusta coffee beans. The USDA June 7 revised its 2021-22 coffee production estimate for Vietnam upward to 31.58 million bags from 31.1 million bags but said 2022/23 production would fall by -2.2% y/y to 30.9 million bags. Increased coffee supplies are bearish for prices after Cecafe reported on July 6 that Brazil's Jun green coffee exports rose +0.6% y/y to 2.793 mln bags. Signs of increased global coffee supplies are bearish for prices after the International Coffee Organization (ICO) reported July 5 that global 2022 coffee exports for Oct-May were up +1.3% y/y at 88.506 mln bags. Also, the Colombia Coffee Growers Federation reported on July 6 that Colombia's June coffee exports rose +6% y/y to 939,000 bags. Colombia is the world's second-largest producer of arabica beans.
Brazilian coffee farmers harvested 59% of the 2022/23 coffee crop as of July 12, below the 5-year average of 65%. In a bearish factor, the USDA, in its bi-annual report released on June 23, projected that 2022/23 global coffee production would climb +4.7% y/y to 174.95 mln bags, primarily due to Brazil's arabica crop entering the on-year of the biennial production cycle. The USDA also projects that 2022/23 global coffee ending stocks will climb +6.3% y/y to 34.704 mln bags. The International Coffee Organization (ICO) recently cut its global 2020/21 supply estimate to a deficit of -3.13 mln bags from a previous estimate of a +1.2 mln bag surplus. In addition, ICO lowered its global 2020/21 coffee production estimate to 167.17 mln bags from 168.88 mln bags and raised its 2020/21 global coffee consumption estimate to 170.30 mln bags from 167.68 mln bags.