24.01.2024 – Once again, coffee is making a name for itself. Stocks are low. Although Brazil is exporting more again, dry weather is currently a bullish factor here. In addition, exports from Vietnam are falling due to the attacks by the Houthi rebels in the Horn of Africa.
Is Arabica resuming its upward trend? It almost looks like it, here is the daily chart.
Source: Bernstein Bank GmbH
Prices rose sharply at the start of the week. This is because the weather service Somar Meteorologia reported rainfall of only 89 per cent of the average for the important Brazilian growing region of Minas Gerais. Minas Gerais produces around a third of the country’s Arabica plants.
ICE reports low stocks
In addition, the Intercontinental Exchange in the US state of Georgia reported Arabica stocks of around 254,000 bags – which is only moderately above the 24-year low of 224,000 bags at the end of November. Robusta stocks fell to a new record low of 2,932 lots, with one of these lots equating to 10 metric tonnes.
This could consolidate the medium-term trend to the north. Just last week, the Brazilian producers’ association Conab had forecast an increase in coffee production of 5.4 per cent to 58 million bags for 2024.
Vietnam produces less
However, the market is currently lacking output from Vietnam, which is a major Robusta producer. When Robusta is lacking, roasters switch to Arabica. Vietnam is feeling the effects of the Huthi rebels’ attacks on international shipping. Around a fortnight ago, the Vietnamese customs authority reported that exports for 2023 are likely to fall by 8.7 per cent year-on-year to 1.6 million tonnes. The Ministry of Agriculture had already warned in November that the harvest in the 2023/24 season could fall by 10 per cent to around 1.66 million tonnes due to drought – this would be the lowest level in four years.
The bottom line: We are currently observing a turn in market sentiment for coffee. Which will please traders with the right instinct. Whether long or short – Bernstein Bank wishes you successful trades and investments!
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