Mixed Coffee Prices Amid Supply Concerns and Weather Challenges

On Wednesday, May arabica coffee (KCK25) closed up +11.55 (+2.90%), while May ICE robusta coffee (RMK25) dipped slightly down -2 (-0.04%).

Market Performance and Weather Impact

Coffee prices saw a mixed settlement on Tuesday, with arabica reaching a 2-week high. Below-normal rainfall in Brazil poses risks to coffee crop yields, supporting prices. Somar Meteorologia reported that ongoing dry and hot weather in Brazil could harm coffee crops during their final development phase ahead of the anticipated harvest in May.

In contrast, robusta coffee prices fell from a 1-1/2 week high on the prospect of abundant rainfall in Vietnam, expected to enhance soil moisture and boost yields. Updated forecasts indicate a chance of daily rain for the upcoming week in Vietnam’s Central Highlands, the country’s key coffee-growing region.

Brazil’s Coffee Yield Reports

According to Somar Meteorologia, Brazil’s largest arabica coffee-growing region, Minas Gerais, received 11.4 mm of rain in the week ending February 22, accounting for only 24% of the historical average. The rain report for this week was delayed due to the Brazilian Carnival holiday. Brazil is recognized as the world’s largest arabica coffee producer.

Additionally, declining inventories are supporting coffee prices. ICE-monitored robusta coffee inventories recently fell to a 2-month low of 4,247 lots. Meanwhile, arabica inventories decreased to a 9-1/4 month low of 758,514 bags on February 18, though they have since bounced back to a 2-week high of 809,128 bags as of last Thursday.

Sales Trends and Production Outlook

A notable factor impacting the market is that a greater percentage of Brazil’s coffee harvest has been sold compared to previous years, limiting available supply. As of February 11, Safras & Mercado reported that producers sold 88% of Brazil’s 2024/25 coffee harvest, up from 79% at the same time last year and exceeding the 5-year average of 82%. In contrast, sales for the 2025/26 crop are lagging at only 13%, compared to a 4-year average of 22%, indicating producers are hesitant to sell.

Concerns over supply continue to put upward pressure on coffee prices. Cecafe reported that Brazil’s green coffee exports in January dropped -1.6% year-over-year to 3.98 million bags. Additionally, as of January 28, Conab, Brazil’s government agency for crop forecasting, projected a -4.4% annual decrease for Brazil’s 2025/26 coffee crop, estimating it at a 3-year low of 51.81 million bags. Furthermore, Conab revised its 2024 forecast downwards by -1.1% from 54.8 million to 54.2 million bags.

The residual effects of last year’s dry El Niño weather may contribute to prolonged damage to coffee crops in South and Central America. Rainfall in Brazil has been significantly below average since April, adversely impacting coffee trees during critical flowering stages and diminishing forecasts for the 2025/26 arabica coffee crop. Cemaden, a natural disaster monitoring center, reported that Brazil is currently experiencing its driest weather since 1981. Meanwhile, Colombia, the second-largest arabica producer, is gradually recovering from last year’s El Niño-induced drought.

Vietnam’s Robust Coffee Supply Challenges

Robusta coffee prices are also supported by a decline in robusta production. Drought conditions led to a -20% decrease in Vietnam’s coffee production for the 2023/24 crop year, down to 1.472 million metric tons, which is the smallest production in four years. The USDA’s Foreign Agricultural Service (FAS) anticipates a slight dip in Vietnam’s robusta coffee production for 2024/25 to 27.9 million bags, down from 28 million bags in 2023/24. Furthermore, exports reported by Vietnam’s General Statistics Office on January 10 fell -17.1% year-over-year to 1.35 million metric tons. Conversely, the Vietnam Coffee and Cocoa Association revised its 2024/25 production estimate upward to 28 million bags from an earlier prediction of 27 million bags.

Global Coffee Export Trends

News of rising global coffee exports appears bearish for prices. Recently, Conab reported that Brazil’s coffee exports for 2024 will rise +28.8% year-over-year to a record 50.5 million bags. Similarly, Vietnam’s General Statistics Office announced a +6.3% month-over-month increase in January’s coffee exports to 134,000 metric tons. Vietnam leads the world in robusta coffee production. However, the International Coffee Organization (ICO) reported a -12.4% year-over-year decline in global coffee exports to 10.73 million bags in December and an overall decrease of -0.8% from October to December, amounting to 32.25 million bags.

The USDA’s biannual report on December 18 provided a mixed outlook for coffee prices. The FAS projected a +4.0% year-over-year increase in world coffee production for 2024/25 to 174.855 million bags, including a +1.5% rise in arabica production to 97.845 million bags and a +7.5% rise in robusta production to 77.01 million bags. However, ending stocks for 2024/25 are expected to decline by -6.6% to a 25-year low of 20.867 million bags from the 22.347 million bags anticipated for 2023/24. Separately, USDA’s FAS projected Brazil’s 2024/25 coffee production at 66.4 million metric tons, below the previous forecast of 69.9 million metric tons, with inventories expected to drop -26% year-over-year to 1.2 million bags by the end of the 2024/25 season in June.

For the 2025/26 marketing year, Volcafe on December 17 revised its Brazil arabica coffee production estimate down to 34.4 million bags, reducing its forecast by approximately 11 million bags from its September estimate. This adjustment reflects findings from a crop tour that highlighted the severity of ongoing drought conditions in Brazil. The company now anticipates a global arabica coffee deficit of -8.5 million bags for 2025/26, an increase from a projected deficit of -5.5 million bags for 2024/25. This marks five consecutive years of deficits.

On the date of publication, Rich Asplund did not have 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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