Coffee Prices Surge Amid Supply Concerns
Abolished Weather Patterns and Lower Production Estimates Fuel Market Upheaval
March arabica coffee (KCH25) today saw an increase of +8.20 (+2.24%), while March ICE robusta coffee (RMH25) rose by +104 (+1.85%).
Coffee prices have continued to rise this week, with arabica reaching a new all-time high for nearest futures and robusta climbing to a two-month peak. Tight global coffee supplies are driving these price increases. Brazil’s government crop forecasting agency, Conab, recently predicted a 4.4% decline in the 2025/26 coffee crop, estimating it will reach a three-year low of 51.81 million bags. Just last week, Conab revised its 2024 estimate down by 1.1%, bringing it to 54.2 million bags from September’s 54.8 million bags.
Arabica coffee is further supported by a lack of rainfall in Brazil. According to Somar Meteorologia, the Minas Gerais region, which is the largest arabica-growing area in Brazil, received only 26.5 mm of rain last week—about 53% of the historical average. The effects of the previous year’s dry El Niño conditions could lead to ongoing damage to coffee crops in South and Central America. Rainfall in Brazil has been persistently below average since last April, impacting coffee trees during critical flowering stages and diminishing prospects for the 2025/26 arabica crop. Notably, Brazilian weather is currently the driest it has been since 1981, as reported by the natural disaster monitoring center Cemaden. Colombia, the second-largest coffee producer globally, is gradually bouncing back from last year’s drought exacerbated by El Niño.
Persistent global coffee supply concerns are sustaining prices and encouraging fund investments in coffee commodities. On December 17, Volcafe cut its 2025/26 Brazil arabica production estimate to 34.4 million bags, which is approximately 11 million bags less than what was projected in September. Volcafe also anticipates a global arabica coffee deficit of 8.5 million bags in 2025/26, wider than the previous year’s deficit of 5.5 million bags and marking the fifth consecutive year of shortages.
Robusta prices are similarly influenced by decreasing production. Vietnam has experienced a significant drought, leading to a 20% drop in coffee production for the 2023/24 crop year, resulting in the smallest crop in four years at 1.472 million metric tons. The USDA Foreign Agriculture Service (FAS) had projected that Vietnam’s robusta coffee production for the upcoming marketing year 2024/25 would slightly decline to 27.9 million bags from 28 million bags in 2023/24. Moreover, Vietnam’s General Statistics Office reported a 17.1% year-over-year decrease in coffee exports, totaling 1.35 million metric tons for 2024. Conversely, the Vietnam Coffee and Cocoa Association raised its production forecast for 2024/25 to 28 million bags from an earlier estimate of 27 million bags.
On the contrary, there is an increase in robusta coffee inventories, which places downward pressure on prices. ICE-monitored robusta coffee inventories hit a three-and-three-quarter month high last Friday, reaching 4,603 lots. Meanwhile, arabica inventories monitored by ICE peaked at a two-and-a-half-year high of 993,562 bags on January 6 but have since declined, dropping to 902,995 bags—a seven-week low—as of Wednesday.
Recent reports of increased global coffee exports could negatively affect pricing as well. Conab stated on Tuesday that Brazil’s 2024 coffee exports soared by 28.8% year-over-year, setting a record at 50.5 million bags.
In another development, the International Coffee Organization (ICO) announced an upbeat forecast for global coffee production in the 2023/24 season, projecting a rise of 5.8% to a record 178 million bags, attributed to a notably productive off-biennial crop year. At the same time, ICO revealed that global coffee consumption experienced a 2.2% year-over-year increase, reaching a new record of 177 million bags, which has led to a surplus of 1 million bags.
The USDA’s biannual report, released on December 18, presented a mixed outlook for coffee prices. The USDA FAS indicated that world coffee production for 2024/25 is expected to rise by 4.0% year-over-year to 174.855 million bags. They project arabica production to increase by 1.5% to 97.845 million bags, while robusta production is expected to grow by 7.5% to 77.01 million bags. Additionally, the USDA anticipates that ending stocks for 2024/25 will decrease by 6.6%, dropping to a 25-year low of 20.867 million bags from 22.347 million bags in 2023/24. Furthermore, the USDA FAS indicated that Brazil’s 2024/25 coffee production is forecasted at 66.4 million metric tons, lower than their previous prediction of 69.9 million metric tons. They estimate Brazil’s coffee inventories will fall to 1.2 million bags at the end of the 2024/25 season, showing a decline of 26% from the previous year.
On the date of publication, Rich Asplund did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data included herein is for informational purposes only. To read more, you can view the Barchart Disclosure Policy here.
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