Coffee Prices Show Mixed Trends Amid Market Fluctuations
MARCH ARABICA COFFEE POSTS CONTRACT HIGH; ROBUSTA SLIDES ON BRAZILIAN REAL WEAKNESS
March arabica coffee (KCH25) closed up +3.20 (+1.09%) on Thursday, while January ICE robusta coffee (RMF25) ended down -11 (-0.23%). The day’s trading resulted in mixed outcomes, with March arabica marking a contract high and December arabica achieving a 13-year nearest-futures high. Support for these gains came from the USDA’s Foreign Agricultural Service (FAS), which projected Brazil’s 2024/25 coffee production at 66.4 million metric tons (MMT). This estimate is below the USDA’s official forecast of 69.9 MMT. Additionally, the FAS noted that Brazil’s coffee inventories are expected to reach 1.2 million bags by June 2025, a 26% decrease year-over-year.
Despite initial highs, coffee prices retreated later in the day, with robusta dropping as the Brazilian real (^USDBRL) slipped to a two-week low against the dollar. This decline triggered profit-taking and long liquidations in coffee futures, as a weaker real typically leads to increased export activity from Brazil’s coffee producers.
This week, coffee prices have been buoyed by worries regarding long-term crop damage in Brazil due to drought. Since April, Brazil has experienced below-average rainfall, which has adversely affected coffee trees during the crucial flowering stage and diminished prospects for the 2025/26 arabica coffee crop. According to Cemaden, the natural disaster monitoring center, Brazil is enduring its driest conditions since 1981.
In the robusta market, tight supply is helping to bolster prices. Vietnam’s General Department of Customs reported a decline of 11.6% month-over-month in October coffee exports, totaling 45,412 metric tons. Furthermore, coffee exports from January to October fell 11.1% year-over-year, reaching 1.15 MMT. Concerns are also rising about heavy rains in Vietnam, which could flood coffee fields and delay the harvest. Vietnam remains the world’s leading robusta producer and is just starting its coffee harvest.
Robusta coffee prices are being supported by reduced production. Vietnam’s agriculture department indicated that the country’s coffee output for the 2023/24 crop year has decreased by 20% to 1.472 MMT—the smallest yield in four years—primarily due to drought conditions. The USDA’s FAS also projects a slight decline in Vietnam’s robusta production for the 2024/25 marketing year, estimating 27.9 million bags compared to 28 million bags in the 2023/24 season.
On a more supportive note for coffee prices, Brazil’s crop forecasting agency (Conab) revised its 2024 coffee production estimate downward to 54.8 million bags from a previous 58.8 million bags forecasted in May.
Recent rainfall signals have momentarily relieved concerns about drought in Brazil. Somar Meteorologia reported that the Minas Gerais region, Brazil’s largest arabica coffee-producing area, received 60.9 mm of rain last week—127% of its historical average.
However, signs of a larger global coffee supply are exerting bearish pressure on prices. The International Coffee Organization (ICO) reported that global coffee exports in September increased by 25% year-over-year to 10.76 million bags. Furthermore, from October to September, exports rose by 11.7% year-over-year, totaling 137.27 million bags.
Despite tight coffee inventories bolstering prices, some bearish signals persist. ICE-monitored arabica coffee inventories have recovered from a 24-year low of 224,066 bags in November 2023, reaching a 2-1/3 year high of 893,325 bags by Thursday. In contrast, ICE-monitored robusta inventories dipped to a six-and-a-half month low of 3,854 lots last Tuesday, having previously peaked at a one-and-three-quarter year high of 6,521 lots in July. These inventories remain above the record low of 1,958 lots set in February 2024.
On a more somber note, Brazil’s coffee export data has been unfavorable. Cecafe reported that Brazil’s green coffee exports in October increased by 11% year-over-year to 4.57 million bags. Additionally, as reported on July 11, Brazil’s total coffee exports for the 2023/24 season surged by 33% year-over-year to a record 47.3 million bags.
Further casting a shadow on prospects, last month the ICO projected that global coffee production for 2023/24 would rise by 5.8% year-over-year, reaching a record 178 million bags, owing to an exceptional off-biennial crop year. The ICO also estimated that global coffee consumption would grow by 2.2% year-over-year to a record 177 million bags, resulting in a surplus of 1 million bags of coffee.
The USDA’s bi-annual report released on June 20 added bearish pressure to coffee prices. The USDA’s FAS anticipates a 4.2% year-over-year increase in global coffee production for 2024/25, reaching 176.235 million bags. This is projected to be supported by a 4.4% increase in arabica production to 99.855 million bags, and a 3.9% rise in robusta production to 76.38 million bags. Ending stocks for 2024/25 are expected to climb by 7.7% to 25.78 million bags, up from 23.93 million bags in 2023/24. Notably, Brazil’s arabica production is expected to rise by 7.3% year-over-year to 48.2 million bags due to higher yields and increased planting. Meanwhile, Colombia, the second-largest arabica producer, is projected to see a 1.6% increase in production for 2024/25 to 12.4 million bags.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
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