Rising Coffee Prices Driven by Weather and Supply Concerns

May arabica coffee (KCK25) today surged by +14.80 (+3.71%), while May ICE robusta coffee (RMK25) increased by +37 (+0.66%). This week’s rally in coffee prices saw arabica reaching a two-week high and robusta climbing to a one-and-a-half week high. The current dry conditions in Brazil pose a threat to coffee crop yields, thus bolstering prices. Somar Meteorologia reported that Brazil will experience dry and hot weather for the remainder of the week, which could harm coffee crops in their crucial final development stages ahead of the May harvest.

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According to Somar Meteorologia, Brazil’s largest arabica coffee-growing area, Minas Gerais, only received 11.4 mm of rainfall for the week ending February 22, representing just 24% of the historical average. The rainfall report was delayed due to the Brazilian Carnival holiday. As the world’s leading arabica coffee producer, Brazil’s weather patterns significantly influence global coffee prices.

Further supporting coffee prices are dwindling inventories. Last Friday, ICE-monitored robusta coffee inventories hit a two-month low of 4,247 lots. In contrast, arabica coffee inventories monitored by ICE dropped to a 9-and-a-quarter month low of 758,514 bags on February 18, though they have since recovered to a two-week high of 809,128 bags as of last Thursday.

Another positive factor for prices is that an increasing portion of Brazil’s coffee harvest has already been sold compared to previous years, indicating reduced supply. As of February 11, Safras & Mercado reported that producers had sold 88% of Brazil’s 2024/25 coffee harvest, surpassing last year’s figure of 79% and the five-year average of 82%. In contrast, only 13% of the 2025/26 crop has been sold, significantly below the four-year average of 22%, which signals a reluctance among producers to sell.

Ongoing supply concerns continue to support coffee prices. Cecafe noted that Brazil’s green coffee exports for January fell by -1.6% year-on-year to 3.98 million bags. Additionally, on January 28, Conab, Brazil’s government crop forecasting agency, projected a 4.4% year-on-year decline in Brazil’s 2025/26 coffee crop to a three-year low of 51.81 million bags. Conab also reduced its estimate for the 2024 coffee crop by -1.1% to 54.2 million bags from a previous estimate of 54.8 million bags.

The ramifications of last year’s dry El Niño weather may result in long-term damage to coffee crops in South and Central America. Consistently below-average rainfall in Brazil since last April has harmed coffee trees during the critical flowering phase, which impacts the potential yield of the 2025/26 arabica crop. Brazil is experiencing its driest conditions since 1981, according to Cemaden, a natural disaster monitoring agency. Meanwhile, Colombia, the second-largest producer of arabica coffee, is gradually recovering from the drought caused by El Niño.

Robusta coffee prices are also being supported by reduced production. Drought conditions have led to a 20% drop in Vietnam’s coffee production for the 2023/24 crop year, coming in at 1.472 million metric tons—its smallest yield in four years. The USDA Foreign Agricultural Service (FAS) projected a slight decline in Vietnam’s robusta production for the 2024/25 marketing year to 27.9 million bags from 28 million bags in 2023/24. Additionally, the General Statistics Office of Vietnam reported a -17.1% year-on-year drop in 2024 coffee exports to 1.35 million metric tons. Conversely, the Vietnam Coffee and Cocoa Association raised its 2024/25 production estimate to 28 million bags from October’s estimate of 27 million bags.

However, news of increasing global coffee exports presents a bearish outlook for prices. Conab reported that Brazil’s 2024 coffee exports rose by +28.8% year-on-year to a record 50.5 million bags. Furthermore, Vietnam’s General Statistics Office announced a +6.3% month-on-month increase in January coffee exports to 134,000 metric tons. Nonetheless, the International Coffee Organization (ICO) reported a -12.4% year-on-year decline in global coffee exports for December, totaling 10.73 million bags, with a -0.8% decrease for the October to December quarter at 32.25 million bags.

The USDA’s biannual report on December 18 provided a mixed outlook for coffee prices. The USDA’s FAS projected a +4.0% year-on-year increase in world coffee production for 2024/25, predicting a +1.5% rise in arabica production to 97.845 million bags and a +7.5% increase in robusta production to 77.01 million bags. However, FAS forecasts indicate that 2024/25 ending stocks will drop by -6.6%, reaching a 25-year low of 20.867 million bags compared to 22.347 million bags for 2023/24. Additionally, on November 22, the FAS revised Brazil’s 2024/25 coffee production estimate down to 66.4 million metric tons, compared to a previous forecast of 69.9 million metric tons. They project Brazil’s coffee inventories to stand at 1.2 million bags by June 2025, down -26% year-on-year.

For the 2025/26 marketing year, Volcafe adjusted its Brazil arabica coffee production estimate on December 17 to 34.4 million bags—an approximately 11 million bags reduction from its September estimate—after observing the extent of the drought during a crop tour. Volcafe anticipates a global arabica coffee deficit of -8.5 million bags for 2025/26, widening from the -5.5 million bag deficit projected for 2024/25 and marking the fifth consecutive year of deficits.

On the date of publication, Rich Asplund did not hold (either directly or indirectly) any positions in the securities mentioned in this article. All information and data in this article are for informational purposes only. For further details, view the Barchart Disclosure Policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.