Coffee Market Update: Mixed Prices Amid Supply Concerns

May arabica coffee (KCK25) closed down -0.40 (-0.10%) on Monday, while May ICE robusta coffee (RMK25) saw a slight gain of +22 (+0.41%).

Market Overview

Coffee prices settled mixed on Monday. Arabica coffee initially advanced but closed slightly lower as ICE-monitored arabica coffee inventories increased to a one-week high of 799,406 bags. In contrast, robusta coffee inventories reached a one-month high last Friday at 4,356 lots.

Weather Impact on Prices

Initially, coffee prices rose Monday due to below-normal rainfall in Brazil. Somar Meteorologia reported that Minas Gerais, Brazil’s leading arabica-growing region, received only 1.1 mm of rain during the week ending March 8, which is just 2% of its historical average. On the other hand, a report by Marex Solutions last Friday forecasted a widening global coffee surplus in the 2025/26 season, anticipating a surplus of 1.2 million bags, up from 200,000 bags in the previous 2024/25 season.

Robusta Coffee Supply Dynamics

Robusta coffee prices face bearish pressure as a report from Vietnam’s General Statistics Office indicated a 6.6% year-on-year increase in coffee exports in February, totaling 169,000 MT. Vietnam is the leading producer of robusta coffee beans.

Supply Disruptions and Forecasts

Concerns over supply continue to elevate coffee prices. According to Cecafe, Brazil’s green coffee exports declined by 1.6% year-on-year in January to 3.98 million bags. Furthermore, Brazil’s government crop forecasting agency, Conab, adjusted its estimates, predicting that the coffee crop for 2025/26 would drop by 4.4% to a three-year low of 51.81 million bags, while cutting the 2024 estimate by 1.1% to 54.2 million bags.

Long-Term Weather Effects

The impact of last year’s dry El Niño conditions may also yield longer-term damage to coffee crops in South and Central America. Since last April, Brazil has experienced below-average rainfall, harming coffee trees during critical growth stages. Cemaden, the natural disaster monitoring center, reported this is Brazil’s driest weather since 1981. Colombia, the second-largest arabica producer, is gradually recovering from last year’s drought induced by El Niño.

Robusta Production Outlook

Lower robusta production supports current prices. Drought conditions have caused Vietnam’s coffee output to decline by 20% in the 2023/24 crop year, reaching a low of 1.472 million metric tons. The USDA FAS, in its May 31 report, expected slight further declines in Vietnam’s robusta production for the 2024/25 marketing year to 27.9 million bags from 28 million bags in 2023/24. Although the General Statistics Office reported a 17.1% year-on-year drop in 2024 exports to 1.35 million metric tons, the Vietnam Coffee and Cocoa Association raised its production forecast for 2024/25 to 28 million bags from an earlier estimate of 27 million bags.

Global Coffee Export Metrics

Expectations of increased global coffee exports pose a bearish trend for prices. Conab noted a 28.8% year-on-year surge in Brazilian coffee exports for 2024, reaching a record 50.5 million bags. However, the International Coffee Organization reported a 12.4% year-on-year decrease in December global coffee exports, totaling 10.73 million bags, with a slight overall decline from October to December.

USDA Projections and Future Outlook

The USDA’s biannual report indicated mixed signals for coffee prices. The agency projected a 4.0% increase in global coffee production for 2024/25, estimating a total of 174.855 million bags. Arabica production is set to rise by 1.5% to 97.845 million bags, while robusta production should increase by 7.5% to 77.01 million bags. Despite this, ending stocks for 2024/25 are expected to decline by 6.6% to a 25-year low of 20.867 million bags.

Additionally, Conab forecasted Brazil’s 2024/25 coffee production at 66.4 million metric tons, down from a previous estimate of 69.9 million metric tons. It also projected a 26% year-on-year drop in Brazil’s coffee inventories by the end of the 2024/25 season to 1.2 million bags.

For the 2025/26 marketing year, Volcafe downgraded its prediction for Brazil’s arabica coffee production to 34.4 million bags, down approximately 11 million bags from its September estimate. The firm also anticipates a global arabica coffee deficit of 8.5 million bags for 2025/26, compared to a deficit of 5.5 million bags for the previous year, marking the fifth consecutive year of deficits.

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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