Since early June, coffee prices have seen a pattern in which a selloff to a new low has been followed by a period of consolidation and then a subsequent rally that could not be sustained. At Tuesday’s low, December Coffee had declined 43.95 cents (23%) from its June 8 close. Since then, it has put together four positive days in a row and has rallied 11.95 cents. The market put in a positive daily reversal on Tuesday and a positive reversal on the weekly chart as well. The coffee market had been pressured by Brazil’s production outlook, with their 2023/24 “off-year” Arabica crop expected to come in 17% larger than 2022/23’s “on-year” crop. However, the June/October selloff may have made Brazilian growers and their potential buyers reluctant to complete deals, and this could be the reason why Brazilian exports were surprisingly low in September. Brazil’s Arabica harvest is nearly finished, which will give the market a good idea of the potential size of Brazilian exports as their supply is drawn down over the next few months. Unlike Brazil, Colombia does not appear to have benefited much from the conclusion of the La Niña event early this year. Their September production came in at 854,000 bags, 1.5% above a year ago. However, their 12-month running production total (October 2022 to September 2023) was 10.617 million bags, only a slight increase from August’s 12-month running total of 10.602 million, which was the lowest 12-month reading since October 2013. The Honduras Coffee Institute expects their nation’s 2023/24 coffee exports to be 6.6% below 2022/23. Honduras is the largest Arabica producer in Central America and the fourth largest in the world. This does not bode well for Central American production this season. The coffee market has priced in Brazil’s large crop, but this may not reflect production issues in Colombia and Central America.
Source: Colombia Coffee Growers Federation.
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Originally Published October 13, 2023
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