Mar arabica coffee (KCH21) this morning is up +0.80 (+0.66%), and March ICE Robusta coffee (RMH21) is up +7 (+0.52%).

Coffee prices this morning shook off early losses and are moderately higher. Coffee prices are moving higher today after Citigroup raised its 2021 coffee price forecast to $1.29 a pound from a previous forecast of $1.21 a pound and said global coffee consumption should return to pre-Covid levels in the latter half of 2021.

Coffee prices have been under pressure this week and posted 1-1/2 week lows earlier today on concern that weak demand is boosting coffee stockpiles after ICE arabica coffee inventories on Thursday rose to an 8-month high of 1.707 mln bags.

Arabica coffee prices are also being undercut by an easing of dry conditions in Brazil. Somar Meteorlogia reported Monday that rainfall in Minas Gerais, Brazil's largest arabica-coffee growing region, was 78.5 mm in the past week, or 160% of the historical average.

Robusta on Wednesday posted a 4-week high on concern about smaller supplies from Vietnam, the world's biggest producer of robusta coffee. The Vietnam General Statistics Office reported last Thursday that Vietnam's Jan coffee exports dropped -17.6% y/y to 120,000 MT. Also, the Vietnam National Coffee Association on Jan 19 projected that Vietnam coffee production would drop -10% to -15 this year due to natural disasters and lower investment resulting from low prices.

An extremely large short position in robusta futures may also support further gains in robusta on any short-covering rally. Last Friday's Commitment of Traders (COT) data showed that funds boosted their net-short ICE robusta futures position by 2,992 to 17,613 short positions in the week ended Feb 2, the largest net-short position in 6 months.

A supportive factor for arabica was Tuesday's data from CeCafe that showed Brazil Jan arabica coffee exports fell -9.3% y/y to 2.65 mln bags.

Arabica last Thursday fell to a 4-week low on concern that coffee demand will remain subdued as Covid lockdowns keep restaurants and coffee shops closed is weighing on prices. Also, the International Coffee Organization (ICO) last Monday projected that 2020/21 global coffee production would increase +1.9% y/y to 171.896 mln bags with a 2020/21 global coffee surplus of 5.268 mln bags, up +27% y/y and a 3-year high. Current global coffee supplies are adequate as the ICO reported that Oct-Dec global coffee exports rose +6.1% y/y to 31.59 mln bags.

A bearish factor for arabica is increased supplies from Colombia after the Colombia coffee growers federation reported last Friday that Colombia Jan coffee exports rose +3% y/y to 1.102 mln bags. Colombia is the world's second-largest producer of arabica beans.

Coffee found support when Conab, Brazil's national agricultural statistics agency, forecast Jan 28 that Brazil’s 2021 arabica coffee production will slump -35.7% y/y to a 12-year low of 31.35 mln bags. Conab said coffee output would fall as Brazil's coffee trees are in the lower-yielding half of a biennial cycle and that insufficient rain in key stages of crop development is exacerbating the decline in yields.

A rebound in ICE coffee inventories is bearish for coffee prices. ICE coffee inventories have been trending higher over the past 3 months. ICE arabica coffee inventories on Wednesday rose to an 8-month high of 1.688 mln bags, recovering further from the 20-3/4 year low of 1.096 mln bags posted on October 5. ICE-monitored robusta coffee inventories on Monday climbed to a 10-month high, rebounding from the 2-year low of 10,808 lots posted on October 14.

Robusta prices have a negative carry-over from Conab's forecast Jan 28 that Brazil's 2021 robusta coffee production will increase as much as 16% y/y to 16.6 million bags.