Mixed Signals in Coffee Markets: Arabica Prices Soar While Robusta Faces Challenges
March arabica coffee (KCH25) on Thursday closed up +6.20 (+1.56%), while March ICE robusta coffee (RMH25) fell -10 (-0.18%).
Record Heights for Arabica Coffee Amid Supply Concerns
Coffee prices exhibited mixed results this Thursday, with arabica coffee achieving a new record high for near-future contracts. For twelve consecutive sessions, arabica coffee prices have been on the rise, driven by ongoing concerns about global coffee supply. Recently, Brazil’s government crop forecasting agency, Conab, projected a 4.4% year-over-year decrease in Brazil’s 2025/26 coffee production, estimating it to be 51.81 million bags, a three-year low. Additionally, Conab lowered its 2024 Brazil coffee crop estimate by 1.1%, now forecasting 54.2 million bags, down from previously estimated 54.8 million bags.
Pressure Builds on Robusta Coffee Prices
Robusta coffee prices fell after the Vietnam General Statistics Office reported a 6.3% month-over-month increase in Vietnam’s January coffee exports to 134,000 metric tons. As the world’s largest robusta producer, changes in Vietnam’s coffee production can have significant implications.
Global Coffee Export Trends Influence Prices
Reduced global coffee export numbers also support pricing. The International Coffee Organization (ICO) noted that global coffee exports in December decreased by 12.4% year-over-year, totaling 10.73 million bags. Furthermore, overall global coffee exports from October to December saw a slight dip of 0.8% year-over-year, reaching 32.25 million bags.
Strengthening Brazilian Real Supports Coffee Prices
The strengthening Brazilian real (^USDBRL), which reached a two-and-a-half-month high against the dollar, has contributed positively to coffee prices. A stronger real generally discourages export sales from Brazilian coffee producers, supporting higher prices.
Weather Patterns Impact Crop Predictions
Conversely, above-normal rainfall in Brazil has alleviated some drought concerns. Last week, Somar Meteorologia reported that Minas Gerais, Brazil’s largest arabica coffee-growing region, received 119 mm of rain, which is 203% of the historical average. However, dry El Niño conditions experienced last year could lead to long-term damage to coffee crops in South and Central America. Brazil has faced its driest weather since 1981, according to the natural disaster monitoring center Cemaden. Meanwhile, Colombia is gradually recovering from last year’s drought affecting its arabica production.
Challenges Loom for Robust Coffee Production
Robusta coffee prices are facing downward pressure due to reduced production attributed to drought. In the 2023/24 crop year, Vietnam’s coffee production decreased by 20% to 1.472 million metric tons, the smallest yield in four years. According to the USDA Foreign Agricultural Service (FAS), Vietnam’s robusta coffee production in 2024/25 is projected to slightly decline to 27.9 million bags from 28 million in 2023/24. However, the Vietnam Coffee and Cocoa Association revised its 2024/25 production estimate upward to 28 million bags from 27 million bags in October.
Shifts in Coffee Inventories Affect Market Dynamics
The recent increase in robusta coffee inventories, which rose to a four-month high of 4,603 lots, adds bearish pressure on prices. In contrast, arabica coffee inventories monitored by ICE fell to a three-month low of 847,805 bags as of Wednesday, down from a two-and-a-half-year high of 993,562 bags on January 6.
Global Coffee Production Sees Record Figures
Recent data from Conab indicates an increase in Brazil’s 2024 coffee exports by 28.8% year-over-year, reaching a record 50.5 million bags. The ICO’s latest report indicates that global coffee production for 2023/24 has risen by 5.8% year-over-year to a record 178 million bags, supported by an exceptional off-biennial crop year. Meanwhile, global coffee consumption is expected to rise by 2.2% y/y, resulting in a slight surplus of 1 million bags.
Future Estimates Signal Challenges Ahead
The USDA’s biannual report from December provided mixed signals for coffee prices. The FAS anticipates a 4.0% year-over-year increase in global coffee production for 2024/25, estimating it at 174.855 million bags. This includes a 1.5% increase in arabica production to 97.845 million bags and a 7.5% rise in robusta production to 77.01 million bags. Nonetheless, the FAS foresees that ending stocks will decline by 6.6%, hitting a 25-year low of 20.867 million bags.
Notably, Volcafe recently adjusted its estimate for Brazil’s arabica production in the 2025/26 marketing year to 34.4 million bags, down approximately 11 million bags from its September forecast. Volcafe predicts a global arabica coffee deficit of 8.5 million bags for 2025/26, surpassing the projected 5.5 million bag deficit for 2024/25, marking the fifth consecutive year of deficits.
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 are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
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