Coffee Prices Drop Sharply Amid Supply and Demand Pressures

July arabica coffee (KCN25) is down -2.85 (-0.81%), while July ICE robusta coffee (RMN25) has fallen -19 (-0.41%).

Coffee prices continue to decline, with arabica reaching a seven-week low and robusta hitting a six-and-a-half-month low.

The drop in prices follows forecasts for increased coffee production. The USDA’s Foreign Agricultural Service (FAS) projects Brazil’s 2025/26 coffee production to rise by 0.5% year-over-year (y/y) to 65 million bags. Vietnam’s output is expected to increase by 6.9% y/y to 31 million bags.

Growing ICE coffee inventories are contributing to the price decline. Robust coffee inventories reached an eight-month high of 5,438 lots, while arabica inventories hit a three-and-three-quarter-month high of 892,468 bags.

Last week, the USDA estimated Honduras’s coffee production for 2025/26 would rise 5.1% y/y to 5.8 million bags. Additionally, consulting firm Safras & Mercado raised its Brazil production estimate to 65.51 million bags from 62.45 million bags. Brazil’s CONAB increased its 2025 coffee production forecast to 55.7 million bags from 51.81 million bags.

Concerns about demand also weigh on coffee prices. Major importers, including Starbucks and Hershey, have indicated that a 10% tariff on U.S. imports could lead to price increases and lower sales volumes.

Nonetheless, there are concerns that adverse weather conditions in Brazil could impact yields. Somar Meteorologia reported Minas Gerais, Brazil’s largest arabica coffee area, received just 0.3 mm of rain last week, or 4% of the historical average.

Brazil’s export numbers show a potential supply tightening. Cecafe reported that Brazil’s April green coffee exports fell 28% y/y to 3.05 million bags, while January to April exports decreased by 15.5% y/y to 13.186 million bags.

Robusta prices may receive some support due to reduced production in Vietnam, where drought has led to a 20% drop, making the 2023/24 crop the smallest in four years. Vietnam’s exports are down 17.1% y/y to 1.35 MMT for 2024. Last Tuesday, Vietnam reported a 9.8% decrease in 2025 January-April coffee exports, totaling 663,000 MT. Additionally, the Vietnam Coffee and Cocoa Association lowered its 2024/25 production estimate to 26.5 million bags.

In contrast, Rabobank anticipates Brazil’s 2025/26 robusta coffee crop will increase by 7.3% y/y to a record 24.7 million bags.

The USDA’s biannual report, released December 18, was mixed. The FAS projected a 4.0% increase in world coffee production for 2024/25 to 174.855 million bags. This includes a 1.5% rise in arabica production to 97.845 million bags and a 7.5% rise in robusta to 77.01 million bags. Ending stocks for 2024/25 are expected to drop by 6.6% to a 25-year low of 20.867 million bags.

Volcafe cut its 2025/26 Brazil arabica production estimate to 34.4 million bags, down about 11 million bags from its earlier estimate. It projects a global arabica coffee deficit of 8.5 million bags for 2025/26, wider than the previous year’s deficit.

On the date of publication, Rich Asplund did not hold positions in any of the securities mentioned. All information is for informational purposes only. For more details, view the Barchart Disclosure Policy here.

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