Coffee Prices Decline Amid Increasing Inventories and Supply Concerns

May arabica coffee (KCK25) closed Wednesday down -7.00 (-1.78%), while May ICE robusta coffee (RMK25) fell by -44 (-0.79%).

Market Dynamics and Inventory Shifts

Coffee prices decreased moderately on Wednesday as rising inventories at the ICE helped alleviate supply concerns. On Tuesday, arabica coffee stocks monitored by ICE reached a 1-week high of 803,032 bags. In addition, robusta coffee inventories hit a 1-month high last Friday at 4,356 lots.

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Further influencing coffee prices was a report from Marex Solutions released last Friday, which indicated a projected global coffee surplus for the 2025/26 season expected to rise to 1.2 million bags, up from a surplus of 200,000 bags in the 2024/25 season.

Production Concerns from Key Producers

Bearish trends for robusta coffee emerged from a last Thursday report by Vietnam’s General Statistics Office, revealing that February coffee exports increased by 6.6% year-over-year to 169,000 metric tons. As the world’s leading producer of robusta coffee beans, Vietnam’s data weighs heavily on market expectations.

A concerning factor for coffee prices remains Brazil’s weather conditions. Somar Meteorologia reported that the Minas Gerais region, Brazil’s main arabica coffee production area, received only 1.1 mm of rain for the week ending March 8—just 2% of its historical average. Additionally, the dollar index (DXY00) fell to a 4-3/4 month low on Tuesday, which provided some support to coffee prices.

Supply Fears and Future Projections

Ongoing supply fears continue to underpin coffee prices. Cecafe reported on February 12 that Brazil’s January green coffee exports dropped by 1.6% year-over-year to 3.98 million bags. Furthermore, on January 28, Conab, Brazil’s government crop forecasting agency, adjusted its forecast for Brazil’s 2025/26 coffee crop down by 4.4% to a 3-year low of 51.81 million bags. They also revised the 2024 estimate down to 54.2 million bags from a previous 54.8 million.

The lingering effects of last year’s dry El Nino conditions could lead to long-term damage to coffee crops in South and Central America. Between April of last year and now, rainfall in Brazil has remained below average, impacting coffee trees during the critical flowering stage and threatening the arabica coffee crop in 2025/26. Brazil is currently experiencing its driest weather since 1981, according to the natural disaster monitoring center Cemaden. Colombia, the second-largest producer of arabica beans, is cautiously recovering from last year’s drought.

In contrast, robusta coffee prices are finding some support from declining robusta production. Drought conditions caused Vietnam’s coffee production in the 2023/24 crop year to fall by 20% to 1.472 million metric tons, the lowest output in four years. The USDA Foreign Agricultural Service (FAS) projected a slight dip in Vietnam’s robusta production to 27.9 million bags in the 2024/25 marketing year, down from 28 million bags in 2023/24. The 2024 Vietnam coffee export figures also suggest a 17.1% year-over-year decline to 1.35 million metric tons. Additionally, the Vietnam Coffee and Cocoa Association recently reduced its 2024/25 production estimate to 26.5 million bags from December’s 28 million bags.

Global Supply Trends and Future Market Outlook

Contrary to the supply shortages, larger global coffee exports can exert downward pressure on prices. Conab reported in early February that Brazil’s 2024 coffee exports surged by 28.8% year-over-year to a record 50.5 million bags. However, data from the ICO revealed that global coffee exports in December fell by 12.4% year-over-year to 10.73 million bags, and total global exports from October to December dipped by 0.8% year-over-year to 32.25 million bags.

The USDA’s biannual report released on December 18 contained mixed messages for coffee prices. The USDA FAS projected an increase in global coffee production for the 2024/25 season by 4.0% year-over-year to 174.855 million bags, including a 1.5% rise in arabica production to 97.845 million bags and a 7.5% boost in robusta production to 77.01 million bags. The FAS also forecasted a -6.6% drop in ending stocks to a 25-year low of 20.867 million bags compared to 22.347 million bags in the 2023/24 season. Additionally, the USDA had previously reported on November 22 that Brazil’s 2024/25 coffee production would likely be 66.4 million metric tons, below earlier estimates.

Looking ahead to the 2025/26 marketing year, Volcafe cut its estimate for Brazil’s arabica coffee production to 34.4 million bags, approximately 11 million bags lower than a previous forecast after observing significant drought conditions. Volcafe projects an arabica coffee deficit in 2025/26 of -8.5 million bags, larger than the -5.5 million bag deficit anticipated for 2024/25, marking the fifth consecutive year of shortages.

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 is intended solely for informational purposes. For more details, please review the Barchart Disclosure Policy here.

 

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