Coffee Prices Experience Mixed Trends Amid Supply Concerns

May arabica coffee (KCK25) closed down -0.70 (-0.19%) on Wednesday, while May ICE robusta coffee (RMK25) saw a slight increase of +3 (+0.06%).

Market Overview

On Wednesday, coffee prices settled in mixed fashion, continuing their downward trajectory for the week. Arabica coffee fell to a three-week low, whereas robusta coffee hit a one-month low. The stronger U.S. dollar exerted downward pressure on most commodity prices, including coffee. Additionally, arabica coffee prices faced pressure as ICE-monitored arabica inventories rose to a one-week high of 803,066 bags on Tuesday, up from the previous Tuesday’s nine-month low of 758,514 bags. Conversely, robusta coffee managed to recover from early losses and closed slightly higher after ICE-monitored robusta inventories decreased to a two-month low of 4,296 lots.

Weather Impact on Coffee Supply

Below-normal rain in Brazil is providing support to coffee prices. Somar Meteorologia reported on Monday that Brazil’s largest arabica coffee-producing region, Minas Gerais, received only 11.4 mm of rain last week, amounting to just 24% of the historical average. As the leading producer of arabica coffee worldwide, Brazil’s output is crucial to market dynamics.

In a positive development, a greater portion of Brazil’s coffee harvest has already been sold compared to previous years, indicating a tighter supply. Safras & Mercado disclosed last Monday that producers had sold 88% of Brazil’s 2024/25 coffee harvest as of February 11, surpassing last year’s comparable figure of 79% and the five-year average of 82%. However, sales for the 2025/26 crop are lagging at only 13%, well below the four-year average of 22%, hinting at a refusal among producers to release new supplies.

Export Trends and Supply Concerns

Persistent supply apprehensions continue to drive coffee prices higher. According to Cecafe, Brazil’s green coffee exports for January dipped by -1.6% year-over-year to 3.98 million bags. Additionally, Brazil’s government crop forecasting agency, Conab, projected on January 28 that the country’s 2025/26 coffee crop would see a decline of -4.4% year-over-year to a three-year low of 51.81 million bags. Conab also reduced its 2024 coffee crop estimate by -1.1% to 54.2 million bags from a previous estimate of 54.8 million bags.

The aftermath of last year’s dry El Nino weather could lead to long-term effects on coffee crops in South and Central America. According to Cemaden, Brazil is experiencing its driest weather since 1981, with subpar rainfall affecting critical flowering stages of coffee trees and diminishing prospects for the upcoming arabica coffee harvest. Colombia, the second-largest arabica producer, is gradually recovering from drought conditions.

Robusta Coffee Dynamics

Reduced production in robusta coffee is also supporting prices. Vietnam’s coffee output for the 2023/24 crop year fell by -20% to 1.472 million metric tons, marking the smallest crop in four years due to drought conditions. The USDA Foreign Agricultural Service (FAS) projected on May 31 that Vietnam’s robusta production would slightly decline to 27.9 million bags for the 2024/25 marketing year, down from 28 million bags in the current year. Vietnam’s General Statistics Office reported on January 10 a -17.1% year-over-year decrease in coffee exports for 2024, totaling 1.35 million metric tons. However, on December 3, the Vietnam Coffee and Cocoa Association raised its 2024/25 production estimate to 28 million bags from an October figure of 27 million bags.

Global Coffee Export Trends

On a global scale, news of increased coffee exports can be bearish for prices. Conab stated on February 4 that Brazil’s coffee exports for 2024 rose by +28.8% year-over-year to a record 50.5 million bags. Meanwhile, Vietnam’s General Statistics Office noted a +6.3% month-over-month rise in January coffee exports, reaching 134,000 metric tons. However, data from ICO revealed a -12.4% year-over-year decline in December global coffee exports, totaling 10.73 million bags. For the entire October to December period, global exports fell -0.8% year-over-year to 32.25 million bags.

USDA Forecasts and Future Projections

The USDA’s biannual report on December 18 presented a mixed outlook for coffee prices. The FAS anticipates a +4.0% increase in world coffee production for 2024/25, totaling 174.855 million bags, with arabica production rising by +1.5% to 97.845 million bags and robusta production increasing by +7.5% to 77.01 million bags. Ending stocks for 2024/25 are projected to fall by -6.6% to a 25-year low of 20.867 million bags, down from 22.347 million bags in 2023/24. Furthermore, the FAS predicted Brazil’s coffee production in 2024/25 to be 66.4 million metric tons, lower than a previous estimate of 69.9 million metric tons, with inventories expected to decline by -26% year-over-year by the end of the 2024/25 season in June.

For the 2025/26 marketing year, Volcafe announced on December 17 a reduction in its Brazil arabica coffee production estimate to 34.4 million bags, down by approximately 11 million bags from a September estimate due to severe drought conditions observed during a crop tour. Volcafe projects a global arabica coffee deficit of -8.5 million bags for 2025/26, a widening gap compared to the -5.5 million bag deficit expected for 2024/25, marking the fifth consecutive year of deficits.

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 in this article are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.

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