Mixed Signals in Coffee Market as Arabica Reserves Rise and Brazil Harvest Sales Slow
Arabica coffee futures fell on Friday while robusta prices saw gains, indicating volatility in the coffee markets.
On Friday, May arabica coffee (KCK25) closed down -0.65 (-0.17%), while March ICE robusta coffee (RMH25) ended up +71 (+1.26%). Coffee prices were mixed overall, as arabica futures dropped to a two-week low, influenced by a rebound in inventories that prompted some investors to liquidate their positions. Over three days, ICE-monitored arabica inventories increased by +3.9% to 787,999 bags, recovering from a low of 758,514 bags earlier in the week, a level not seen in nine months.
Robusta coffee stocks also saw fluctuations, peaking at a four-and-a-half-month high of 4,603 lots on January 31, before decreasing to a one-and-three-quarter-month low of 4,297 lots by Tuesday. As of Friday, inventories stood at 4,322 lots.
One key factor affecting supply is that Brazilian coffee producers have sold a greater proportion of their upcoming harvest compared to previous years. According to Safras & Mercado, as of February 11, 88% of Brazil’s 2024/25 coffee crop has been sold, which is significantly higher than 79% at the same time last year and surpasses the five-year average of 82%. However, the sale rate for the 2025/26 crop is considerably slower at just 13%, compared to a four-year average of 22%, indicating that producers are holding back on selling more of their supply.
Concerns about supply continue to elevate coffee prices. Last Wednesday, Cecafe reported a -1.6% year-over-year decrease in Brazil’s green coffee exports for January, totaling 3.98 million bags. Additionally, Brazil’s crop forecasting agency Conab projected a -4.4% year-over-year reduction in the 2025/26 coffee crop to a three-year low of 51.81 million bags, while also lowering the estimate for the 2024 crop by -1.1% to 54.2 million bags from a previous forecast of 54.8 million bags.
Dry conditions in Brazil have raised alarm about potential crop damage. Somar Meteorologia noted that the country’s largest arabica-producing region, Minas Gerais, received just 12.4 mm of rain last week, which is only 20% of its historical average. Brazil remains the world’s largest producer of arabica coffee.
The lingering effects of last year’s dry El Nino weather could lead to long-term damage to coffee crops in South and Central America. Since last April, Brazil has experienced consistently below-average rainfall, affecting coffee trees during critical flowering periods and negatively impacting the prospects for the 2025/26 arabica harvest. Cemaden, a natural disaster monitoring center, indicated that Brazil is facing its driest weather conditions in over four decades. Simultaneously, Colombia, the second-largest arabica producer globally, is slowly recovering from drought conditions caused by El Nino in the previous year.
Robusta prices are also being supported by reduced production. Vietnam’s coffee harvest for the 2023/24 crop year declined -20% to 1.472 million metric tons, marking the smallest output in four years. The USDA’s Foreign Agricultural Service (FAS) revealed on May 31 that Vietnam’s robusta coffee production for the upcoming marketing year of 2024/25 is expected to decrease slightly to 27.9 million bags, down from 28 million bags in 2023/24. In contrast, Vietnam’s General Statistics Office reported on January 10 that 2024 coffee exports fell -17.1% year-over-year to 1.35 million metric tons, while the Vietnam Coffee and Cocoa Association raised its 2024/25 production estimate to 28 million bags from an earlier estimate of 27 million bags.
On the flip side, recent reports of increased global coffee exports add bearish pressure on prices. Conab indicated on February 4 that Brazil’s coffee exports for 2024 rose +28.8% year-over-year, reaching a record 50.5 million bags. Similarly, Vietnam’s coffee exports in January rose +6.3% month-over-month to 134,000 metric tons, as Vietnam leads production of robusta coffee. However, data from the International Coffee Organization (ICO) showed that global coffee exports dropped -12.4% year-over-year in December to 10.73 million bags, with total exports from October to December down -0.8% to 32.25 million bags.
In its biannual report released December 18, the USDA’s Foreign Agricultural Service presented a mixed outlook for coffee prices. It projected a +4.0% year-over-year increase in world coffee production for 2024/25, totaling 174.855 million bags, with arabica production up +1.5% to 97.845 million bags, and robusta production increased by +7.5% to 77.01 million bags. The USDA also anticipates that 2024/25 ending stocks will decline -6.6% to a 25-year low of 20.867 million bags from 22.347 million bags in the previous season. Moreover, on November 22, the USDA’s FAS reduced the forecast for Brazil’s 2024/25 coffee production to 66.4 million metric tons, down from 69.9 million metric tons.
For the 2025/26 marketing year, Volcafe lowered its Brazil arabica coffee production estimate on December 17 to 34.4 million bags, roughly 11 million bags below the previous estimate, after findings from a crop tour highlighted the extent of Brazil’s drought situation. Volcafe anticipates a global arabica coffee deficit of -8.5 million bags for 2025/26, broader than the -5.5 million bags 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 is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
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