Coffee Settles at a 13-1/2 Month High on Supply Concerns

Coffee increased up to a 1-year high, and the December nearest-futures contract posted a 13 and 1/2 month increase. Supply concerns triggered fund buying of coffee futures. Coex Coffee International said that Brazil’s bean crop would be near to 54-55 million bags, below the USDA’s report of 58 million bags. Also, Arabica coffee inventories continue to cut, which is providing support to coffee prices. ICE said arabica bean inventories dropped to a 16-month low of 2.056 million bags.

Also, ICO data showed that global bean exports in October dropped 8.91 million bags, although 2019 average global coffee exports increased 129.8 million bags. Brazil’s Trade Ministry showed that Brazil’s November bean exports decline to 3.293 million bags.

Weather concerns in Brazil are another factor for coffee prices. Somar Meteorologia showed rainfall in Minas Gerais, Brazil’s largest arabica growing bean region, which was only 57.9mm over the past week. This might curb Brazil’s bean yields.

A negative aspect of bean commodities prices is Columbia’s November coffee output increased by 1.506 million bags. Columbia is the world’s second-largest producer of arabica bean.

Previous weakness in the Brazilian real is also bearish for bean prices. The real is building up mildly above low against the dollar of 4.2684/USD. Also, a weaker real encourages export trading by Brazil’s coffee producers.

Robusta coffee fell to a 2-week low after Intimex Group said 2019/2020 robusta bean output in Vietnam would be changed to 5% higher.

Moreover, robusta coffee has support on weather concerns in Vietnam, the world’s largest robusta bean producer. The VNC for Hydro-Meteorological Forecasting said it expects rainfall in Vietnam’s Central Highlands. The country’s largest coffee-producing region might receive 20%-50% less precipitation than total this month.

Vietnam’s agricultural ministry said that Vietnam’s bean exports from January to November dropped 1.473 mmt.

Commodity News: Coffee Hit 12-month High

Coffee futures in the March contract continue its bullish moments to the upside increased another 325 points at 124.50 a pound. It hit a 12-month high as this is the toughest soft commodity at the current time.

Coffee prices are selling far above their 20 and 100 days, moving overall as this trend is strong to the upside. A supportive factor for arabica bean Coex said that Brazil’s bean crop would be almost 54-55 million bags. This is below the USDA’s report of 58 million bags.

There are significant concerns in key coffee-growing regions in the country of Brazil about a lack of rain, as witnessed before. Brazil is the largest producer of bean in the world. Also, it will explode to the upside if it continues as the volatility will rise substantially. It was the last drought that the community experienced.

The combination of a weak cycle for production from Brazil during the 2019/2020 crop year and previous dry conditions across Latin America are lifting the price of arabica bean futures.

In October, the ICO report that world coffee output for the 2019/2020 market year could decrease by 0.9% to 167.4 million bags. The ICO anticipates total production of 95.68 million bags of arabica beans. It would be the lowest since the 2015/2016 crop year. Meanwhile, population growth and the growing addressable market for bean in Asia means the demand to bean continues to grow. Thus, it requires more supplies each year.