Coffee Market Update: Arabica Prices Slide as Supportive Data Emerges

March arabica coffee (KCH25) is down -9.10 (-2.07%), while March ICE robusta coffee (RMH25) rises by +41 (+0.71%).

Arabica Coffee Prices Retreat Amid Supply Concerns

Arabica coffee prices decreased today after reaching an all-time nearest-futures high on Thursday. The decline comes from traders liquidating long positions following a month-long surge. However, ongoing concerns about coffee supply continue to support prices. According to Cecafe, Brazil’s green coffee exports in January fell -1.6% year-on-year to 3.98 million bags. Additionally, Conab, Brazil’s crop forecasting agency, projected a -4.4% year-on-year decline in the 2025/26 coffee crop to a three-year low of 51.81 million bags. Conab also reduced its 2024 coffee crop estimate by -1.1%, lowering it from 54.8 million bags to 54.2 million bags.

Weather Worries and Their Impact on Brazil’s Coffee Production

Below-average rainfall has elevated fears regarding Brazil’s coffee crop and helped maintain coffee prices. Somar Meteorologia reported that Minas Gerais, Brazil’s largest arabica coffee growing region, received only 53.9 mm of rain last week, which is just 85% of the historical average. As the largest producer of arabica coffee globally, Brazil’s weather patterns are crucial.

The lingering effects of last year’s dry El Nino have the potential to cause long-term damage to coffee crops in South and Central America. Since April, rainfall in Brazil has been consistently below average, harming coffee trees during the vital flowering period, which in turn has diminished prospects for the 2025/26 arabica coffee crop. Records from Cemaden indicate that Brazil is experiencing its driest weather since 1981. Meanwhile, Colombia, the second-largest arabica producer, is gradually recovering from drought conditions caused by the same phenomenon.

Supply Levels Shift, Creating Market Tension

After a brief uptick, coffee supply levels are declining again, which tends to support prices. As of January 31, ICE-monitored robusta coffee inventories peaked at a four-month high of 4,603 lots but then fell back to a six-week low of 4,332 lots by Thursday. Similarly, arabica coffee inventories reached a two-and-a-half year high of 993,562 bags on January 6 but have since decreased to a three-and-a-half month low of 841,795 bags as of Wednesday.

Robusta Coffee Prices and Production Challenges

Robusta coffee prices are bolstered by decreased production. Vietnam’s coffee output for the 2023/24 crop year dropped -20% to 1.472 MMT, marking its lowest yield in four years. Projections from the USDA FAS on May 31 indicate that Vietnam’s robusta production will decline slightly to 27.9 million bags in the upcoming marketing year from 28 million bags in 2023/24. Furthermore, a report from Vietnam’s General Statistics Office on January 10 indicated a -17.1% year-on-year decrease in coffee exports for 2024, totaling 1.35 MMT. Conversely, the Vietnam Coffee and Cocoa Association upgraded its production estimate for 2024/25 to 28 million bags, up from an earlier estimate of 27 million bags.

Mixed Signals from Export Data

Recent news of increased global coffee exports is a bearish signal for prices. Conab reported a substantial +28.8% year-on-year rise in Brazil’s 2024 coffee exports, reaching a record 50.5 million bags. Additionally, Vietnam’s coffee exports surged +6.3% month-on-month in January to 134,000 MT. Despite this, the ICO noted a -12.4% year-on-year drop in global coffee exports for December, totaling 10.73 million bags, and a -0.8% decline for the quarter from October to December, with exports amounting to 32.25 million bags.

Global Production and Consumption Trends

In a contrasting trend, the International Coffee Organization (ICO) recently announced that global coffee production for 2023/24 rose by +5.8% year-on-year to an unprecedented 178 million bags, attributed to a favorable off-year crop. Coffee consumption during the same period also increased by +2.2% year-on-year, hitting a record of 177 million bags, which indicates a surplus of 1 million bags.

The USDA’s biannual report, released on December 18, presented mixed predictions for coffee prices. The FAS projected a +4.0% increase in world coffee production for 2024/25, estimating it will reach 174.855 million bags. This includes a +1.5% rise in arabica production to 97.845 million bags and a +7.5% increase in robusta production, which is expected to reach 77.01 million bags. However, forecasts for ending stocks for 2024/25 suggest a -6.6% decline to a 25-year low of 20.867 million bags from 22.347 million bags in 2023/24. In another forecast, the USDA indicated that Brazil’s coffee production for 2024/25 will be reduced to 66.4 MMT, down from a previous estimate of 69.9 MMT. Furthermore, Brazil’s coffee inventories are projected to be at 1.2 million bags by the end of the 2024/25 season, a -26% drop year-on-year.

Drought’s Impact on Future Projections

Regarding the 2025/26 marketing year, Volcafe adjusted its production estimate for Brazil’s arabica coffee down to 34.4 million bags—an 11 million bag decrease from September’s estimate—after investigating the severe effects of prolonged drought conditions in Brazil. Volcafe anticipates a global arabica coffee deficit of -8.5 million bags for 2025/26, which would mark the fifth consecutive year of deficits, compared to a projected -5.5 million bag deficit for 2024/25.

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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