Coffee Prices Rise Amid Brazil’s Crop Concerns
March arabica coffee (KCH25) today is up +5.40 (+1.55%), and March ICE robusta coffee (RMH25) is up +77 (+1.419%).
Forecasts Point to Lower Brazilian Coffee Production
Coffee prices are trending upwards today, although they remain below the significant highs observed on Monday. This increase follows a forecast from Conab, Brazil’s government crop forecasting agency, which predicts a 4.4% decline in Brazil’s 2025/26 coffee crop, taking it to a three-year low of 51.81 million bags.
Brazilian Real Strength Supports Coffee Prices
The Brazilian real (^USDBRL) has strengthened, hitting a two-month high against the dollar. This situation is discouraging coffee export sales from Brazil, further bolstering prices.
Record Arabica Futures Strengthens Market
On Monday, arabica prices saw a record high for nearest-futures, while robusta reached a two-month peak. Concerns over the global coffee supply have been feeding into prices and attracting fund investments. On December 17, Volcafe lowered its production estimate for Brazil’s arabica coffee in 2025/26 to 34.4 million bags, a drop of about 11 million bags from its September forecast, based on insights from a crop tour revealing a significant drought. The ongoing global arabica coffee deficit is now projected at 8.5 million bags for 2025/26, larger than the 5.5 million bag deficit anticipated for 2024/25, marking the fifth consecutive year of deficits.
Further Cuts in Coffee Crop Estimates
Conab’s recent action to cut the 2024 Brazil coffee crop estimate by 1.1% to 54.2 million bags from 54.8 million bags further supports a bullish outlook on coffee. Additionally, arabica coffee is being supported by below-normal rainfall in Brazil. Last week, Minas Gerais, the country’s largest arabica coffee region, received only 26.5 mm of rain, which is just 53% of its historical average.
Drought Impacts Coffee Production
The influence of last year’s dry El Niño weather could lead to long-term damage for coffee crops in South and Central America. Brazil’s rainfall has been significantly below average since last April, harming coffee trees during critical growth periods. Cemaden, the national disaster monitoring center, has reported that Brazil is experiencing its driest weather since 1981. Meanwhile, Colombia, the world’s second-largest arabica producer, is gradually recovering from last year’s drought caused by El Niño.
Robusta Production Concerns
Robusta coffee prices are also under pressure from decreased production. In Vietnam, the 2023/24 coffee crop year saw a 20% drop in coffee production to 1.472 million metric tons, the lowest in four years. The USDA’s Foreign Agriculture Service projected a slight decline for Vietnam’s robusta production in the upcoming 2024/25 marketing year, estimating it to decrease from 28 million bags to 27.9 million bags. Earlier reports indicated a 17.1% year-over-year drop in Vietnam’s coffee exports to 1.35 million metric tons as of January 10. However, there has been a revision upwards for 2024/25 production estimates from the Vietnam Coffee and Cocoa Association, now at 28 million bags, up from an earlier 27 million bags.
Increased Inventories and Global Coffee Exports
Robusta prices face bearish pressure from increased inventories, with ICE-monitored robusta coffee stocks reaching a 3-3/4 month high of 4,603 lots. Similarly, arabica inventories climbed to a 2-1/2 year high but have since decreased to a six-week low of 925,605 bags as of Monday. On a global scale, increased Brazilian coffee exports also weigh on prices; Conab revealed that exports climbed 28.8% year-over-year to reach a new record of 50.5 million bags in 2024.
Mixed Signals from the USDA Report
The USDA’s biannual report released on December 18 provided mixed signals for coffee prices. The USDA FAS anticipates a 4.0% rise in global coffee production to 174.855 million bags in 2024/25, including a 1.5% growth in arabica production and a 7.5% increase in robusta production. However, their forecasts also predict that ending stocks for 2024/25 could decline by 6.6% to a 25-year low of 20.867 million bags. Additionally, the USDA FAS revised Brazil’s coffee production forecast for 2024/25 down to 66.4 million bags from a previous estimate of 69.9 million bags while projecting coffee inventories at 1.2 million bags for the end of the 2024/25 season, down 26% year-over-year.
On the date of publication, Rich Asplund did not hold any positions in the securities mentioned in this article. All information in this article is for informational purposes only. For further details, please see the Barchart Disclosure Policy here.
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