Coffee Prices Rise Amid Supply Concerns and Currency Shifts
In a notable trading day, March arabica coffee (KCH25) closed up +8.50 (+2.64%), while March ICE robusta coffee (RMH25) advanced by +49 (+1.01%).
Market Recovery After Initial Losses
On Wednesday, coffee prices bounced back from early declines, influenced by a weakening dollar (DXY00) that encouraged short covering in coffee futures.
Weather Conditions in Brazil Affecting Coffee Supply
Brazil’s dry weather is also pushing coffee prices higher. Last Monday, arabica coffee reached a three-week peak as Somar Meteorologia revealed that Minas Gerais, Brazil’s leading arabica-growing area, received only 29.6 mm of rainfall last week, which is about 31% of its historical average.
Vietnam’s Coffee Supply and Inventory Dynamics
On Wednesday, robusta coffee hit a two-week low before recovering due to indications of larger supplies from Vietnam. Last Friday, Vietnam’s General Department of Customs reported a surge of +102.6% year-on-year in December coffee exports, reaching 127,655 metric tons.
However, an increase in inventories could lead to lower coffee prices, with ICE-monitored arabica coffee stocks climbing to a 2.5-year high of 993,562 bags last Monday. Similarly, robusta coffee inventories also saw growth, hitting a three-month high of 4,415 lots last Wednesday.
Previous Price Surge Linked to Production Estimates
Previously, coffee prices surged due to concerns about a smaller coffee harvest in Brazil. March arabica prices hit a contract high, and the nearest December coffee futures contract (Z24) reached a record high. The rationale behind this price spike was Volcafe’s revised estimate on December 17, which projected the 2025/26 Brazil arabica coffee crop at 34.4 million bags, down about 11 million bags from the September estimate due to severe drought conditions. Volcafe anticipates an arabica coffee deficit of 8.5 million bags for 2025/26, widening from a 5.5 million bag shortfall expected for the 2024/25 season. This trend marks five consecutive years of deficits.
Further Assessments of Brazilian Coffee Production
Consultancy firm Safras & Mercado estimated the 2025/26 Brazilian coffee crop at 62.45 million bags, indicating a year-on-year decrease of -5%. They project arabica production could decline -15% to 38.35 million bags due to ongoing drought, while robusta output is estimated at 24.1 million bags.
Long-Term Weather Effects and Production Outlook
Last year’s dry El Niño weather pattern may have long-term detrimental effects on coffee crops in South and Central America. Ongoing below-average rainfall in Brazil has reportedly resulted in damage to coffee trees during critical growth stages. Cemaden, a natural disaster monitoring center, noted that Brazil is experiencing its driest conditions since 1981. Meanwhile, Colombia, the second-largest arabica producer, is gradually recovering from last year’s drought.
Robusta Production Challenges in Vietnam
Robusta coffee prices are being supported by lower production levels. Vietnam’s robusta output for the 2023/24 crop year is expected to drop by -20% to 1.472 million metric tons, the lowest yield in four years. The USDA Foreign Agricultural Service (FAS) projected that Vietnam’s robusta coffee production for the 2024/25 marketing year will decrease slightly to 27.9 million bags from 28 million bags in 2023/24. Additionally, exports from Vietnam in 2024 decreased by -17.1% year-on-year to 1.35 million metric tons. Conversely, the Vietnam Coffee and Cocoa Association recently raised its production forecast for 2024/25 to 28 million bags, up from an earlier estimate of 27 million bags.
Global Coffee Export Trends and Production Insights
The increase in global coffee exports adds bearish pressure on prices. The International Coffee Organization (ICO) reported that October global exports for the start of the 2024/25 season rose +15.1% year-on-year to 11.13 million bags; total exports for 2023/24 also rose +11.7% to 137.27 million bags. Brazil’s coffee export figures remain concerning as Cecafe indicated that green coffee exports grew by +2.7% year-on-year to 4.29 million bags, with total Brazilian coffee exports for the 2023/24 cycle reaching a record 47.3 million bags.
Producing More Coffee but Facing Consumption Challenges
The ICO announced that the global coffee production for 2023/24 has climbed +5.8% year-on-year to a record 178 million bags due to a strong off-biennial crop year. Meanwhile, coffee consumption rose by +2.2% year-on-year to 177 million bags, creating a slight surplus of 1 million bags.
The USDA’s biannual report released on December 18 provided mixed signals for coffee prices. The FAS projected a +4.0% rise in world coffee production for 2024/25 to 174.855 million bags, with arabica production increasing by +1.5% to 97.845 million bags and robusta production seeing a +7.5% hike to 77.01 million bags. However, the USDA also forecasted a -6.6% drop in ending stocks to a 24-year low of 20.867 million bags from 22.347 million bags in the previous cycle. Furthermore, USDA previously estimated Brazil’s coffee production for 2024/25 at 66.4 million metric tons, a revision down from the earlier forecast of 69.9 million metric tons, expecting inventories to fall -26% year-on-year by the end of the 2024/25 season.
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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
