Coffee Prices in Decline Amidst Mixed Supply Outlook
March arabica coffee (KCH25) is down -3.15 (-0.96%) today, while January ICE robusta coffee (RMF25) is not trading due to the Boxing Day holiday in the UK.
Rising Supplies Pressuring Arabica Coffee Prices
Today’s drop in arabica coffee prices is linked to an increase in current supplies. According to ICE data, arabica coffee inventories climbed to a 2-1/2 year high of 990,395 bags on Monday. Adding to the pressure is the weak Brazilian real (^USDBRL), which remains stubbornly close to last Wednesday’s record low against the dollar, encouraging Brazilian coffee producers to ramp up exports.
Weather Effects on Coffee Production
Despite lowering prices, coffee is receiving support due to below-average rainfall in Brazil, the largest producer of arabica coffee. Somar Meteorologia reported that Minas Gerais, Brazil’s biggest arabica-growing region, received only 43.6 mm of rain last week, which is 83% of the historical average.
Robusta Coffee Faces Harvest Challenges
Robusta coffee prices are also supported but face challenges due to wet weather in Vietnam, which is slowing down the harvest. Tuan Loc Commodities stated, “This wet weather is expected to persist through December 26, disrupting coffee harvesting or, at best, slowing it significantly.”
Estimates Show Declining Coffee Production
Support for coffee prices has been noted after consultancy group Safras & Mercado estimated that the Brazilian coffee crop for 2025/26 will be 62.45 million bags, marking a -5% decline year-on-year. Safras predicts arabica production will drop -15% year-on-year to 38.35 million bags due to drought, with robusta production estimated at 24.1 million bags.
Increasing Robusta Inventories
Meanwhile, robusta coffee is also feeling pressure from rising inventories. ICE-monitored robusta coffee inventories increased to a 2-month high of 4,092 lots, up from last Monday’s 7-1/2 month low of 3,672 lots.
Recent Price Volatility in Coffee Markets
The past two weeks have seen significant price increases driven by a predicted smaller Brazilian coffee crop. Last Tuesday, arabica coffee reached a contract high, and the nearby December coffee contract (Z24) set a record. This surge followed Volcafe’s adjustment of its 2025/26 Brazil arabica production estimate, which was cut to 34.4 million bags after a crop tour revealed the extent of the drought’s impact. Volcafe anticipates a global arabica coffee deficit of 8.5 million bags for 2025/26, widening from a 5.5 million bag deficit for 2024/25, marking the fifth consecutive year of deficits.
USDA Report Presents Mixed Outlook
A bi-annual report from the USDA last Wednesday offered a mixed view for coffee prices. The USDA’s Foreign Agriculture Service (FAS) projected a 4.0% increase in world coffee production for 2024/25, totaling 174.855 million bags. This includes 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. The FAS also projected a decrease in ending stocks for 2024/25, estimating them to reach a 24-year low of 20.867 million bags by the end of the season.
Declining Vietnamese Coffee Exports
In terms of supply, robusta coffee is underpinned by reduced production in Vietnam. The Vietnam General Department of Customs reported a staggering -47% year-on-year drop in November coffee exports to 63,019 MT. From January to November, exports fell -14% year-on-year to 1.22 MMT. Recent rains caused flooding in coffee fields, delaying the harvest in this robusta-producing nation.
Long-term Effects of El Nino Weather
The impact of dry El Nino conditions earlier this year could lead to more significant coffee crop damage in South and Central America. Since April, rainfall in Brazil has consistently fallen below average, harming coffee trees during the crucial flowering phase, leading to concerns about the 2025/26 arabica coffee crop. Brazil has been experiencing its driest conditions since 1981, according to Cemaden, while Colombia, the second-largest arabica producer, is slowly rebounding from drought conditions.
Robusta Coffee Production Declines
Robusta coffee prices are bolstered by declining production figures. Vietnam’s robusta output for the 2023/24 crop year has decreased by -20%, reaching 1.472 MMT, which is the smallest crop in four years. The USDA FAS projected a slight drop in Vietnam’s robusta production for the 2024/25 marketing year to 27.9 million bags. In contrast, the Vietnam Coffee and Cocoa Association recently raised its 2024/25 production estimate to 28 million bags, showing some optimism.
Global Coffee Exports Surge
On a bearish note, larger global coffee exports may pressure prices. The International Coffee Organization (ICO) reported that October 2024/25 global coffee exports increased by +15.1% year-on-year to 11.13 million bags. Furthermore, global coffee exports for the 2023/24 season rose by +11.7% year-on-year to 137.27 million bags.
Record Coffee Production and Supply
In a further bearish development, the ICO noted a +5.8% year-year increase in global coffee production for 2023/24, reaching a record 178 million bags due to an off-biennial crop year. Simultaneously, global coffee consumption rose by +2.2% year-on-year, also hitting a record at 177 million bags, which amounted to a surplus of 1 million bags.
On the date of publication,
Rich Asplund
did not have (either directly or indirectly) 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
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
