Coffee Prices Surge as Global Supply Concerns Rise

Arabica Coffee Reaches All-Time High Amid Drought in Brazil

March arabica coffee (KCH25) closed up +24.70 (+6.11%), while March ICE robusta coffee (RMH25) increased by +110 (+1.98%).

Heavy Rains Needed in Brazil’s Key Coffee Regions

Coffee prices sharply increased on Monday, with arabica coffee setting a new all-time nearest-futures high. Concerns over Brazil’s coffee crop have intensified due to below-normal rainfall levels. Last week, the Minas Gerais region, Brazil’s largest arabica coffee area, received only 53.9 mm of rain, which is 85% of its historical average. Brazil is recognized as the world’s leading producer of arabica coffee.

Ongoing Fears of Reduced Coffee Supply

Global coffee supply fears continue to support rising prices. Conab, Brazil’s government crop forecasting agency, projected on January 28 that Brazil’s coffee crop in 2025/26 would fall by -4.4% year-on-year to a three-year low of 51.81 million bags. Additionally, they revised down their 2024 crop estimate by -1.1% to 54.2 million bags from their previous estimate of 54.8 million bags.

Declining Global Coffee Exports Impact Prices

Recent reports indicate a decrease in global coffee exports. The ICO announced last Thursday that December global coffee exports decreased by -12.4% year-on-year, totaling 10.73 million bags. Moreover, exports for the October to December period fell by -0.8% year-on-year to 32.25 million bags.

Long-Term Effects of El Niño on Coffee Crops

The dry conditions caused by El Niño have raised concerns over long-term damage to coffee crops in South and Central America. Since last April, Brazil has experienced consistently low rainfall, which has harmed coffee trees during the crucial flowering period, likely impacting the country’s 2025/26 arabica coffee crop production. Cemaden, a natural disaster monitoring center, reported that Brazil is currently facing its driest weather since 1981. Colombia, the second-largest arabica producer globally, is slowly recovering from last year’s drought exacerbated by El Niño.

Robusta Coffee Production Declines Due to Drought

Prices for robusta coffee are also rising due to reduced production. Vietnam’s coffee production for the 2023/24 crop year has dropped by -20% to 1.472 MMT, marking its smallest harvest in four years. The USDA FAS projected a slight decrease in Vietnam’s robusta production for the 2024/25 marketing year to 27.9 million bags, down from 28 million bags in 2023/24. Meanwhile, Vietnam’s coffee exports decreased by -17.1% year-on-year, reaching 1.35 MMT.

Increased Robust Coffee Inventories Weigh on Prices

On the flip side, the rise in robusta coffee inventories could put downward pressure on prices. ICE-monitored robusta inventories reached a four-month high of 4,603 lots on January 31. Conversely, arabica coffee inventories monitored by ICE climbed to a two-and-a-half year high of 993,562 bags on January 6 but have since decreased to a three-month low of 847,805 bags.

Conflicting Data on Global Coffee Exports

Contradictory data regarding global coffee exports may impact price trends. Last Tuesday, Conab noted Brazil’s coffee exports for 2024 increased by +28.8% year-on-year to reach a record 50.5 million bags. Additionally, Vietnam’s January coffee exports rose by +6.3% month-on-month to 134,000 MT.

Overall Coffee Production on the Rise

The International Coffee Organization (ICO) reported a -5.8% year-on-year increase in global coffee production for 2023/24, reaching a record 178 million bags, due to an off-biennial crop year. Consumption also saw a +2.2% increase, leading to a market surplus of one million bags.

Outlook for 2024/25 and Beyond

The USDA’s biannual report from December 18 presented a mixed outlook. It projected a +4.0% increase in world coffee production for 2024/25 to 174.855 million bags, with arabica production rising by +1.5% to 97.845 million bags and robusta by +7.5% to 77.01 million bags. However, ending stocks are expected to fall by -6.6% to a 25-year low of 20.867 million bags.

For the 2025/26 marketing cycle, Volcafe lowered its estimate for Brazil’s arabica coffee production to 34.4 million bags, down by about 11 million bags from a September estimation. This points towards a global arabica coffee deficit of -8.5 million bags for 2025/26, marking the fifth consecutive year of production 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 is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

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