Mixed Results for Coffee Prices Amid Supply Fluctuations
Coffee Price Movements on March Contracts
March arabica coffee (KCH25) closed down -0.05 (-0.02%) on Monday, while March ICE robusta coffee (RMH25) rose by +16 (+0.32%).
Supply Trends Impacting Arabica and Robusta
Despite an early increase, arabica coffee prices slipped due to rising supply levels, with ICE-monitored arabica coffee inventories hitting a 2-1/2 year high of 993,562 bags.
Conversely, robusta coffee prices showed moderate gains, bolstered by declining global supplies. The General Statistics Office of Vietnam noted a 17.2% year-on-year drop in 2024 coffee exports, totaling 1.343 million metric tons (MMT). Vietnam, recognized as the world’s largest robusta producer, saw its robusta prices pull back despite robusta coffee inventories reaching a 3-month high of 4,389 lots.
Weather and Currency Effects on Coffee Prices
Initially, coffee prices surged due to below-average rainfall in Brazil and a strengthening Brazilian real, which discourages export activity. According to Somar Meteorologia, Minas Gerais, Brazil’s key arabica coffee region, received only 62.5 mm of rain last week, 86% of the historical average. The Brazilian real (^USDBRL) also appreciated, reaching a 2-week high against the US dollar.
Recent Price Trends and Production Forecasts
In the prior month, coffee prices spiked significantly due to the expectation of a reduced Brazilian coffee crop. March arabica hit a contract high, and the December nearest-futures contract (Z24) set a record. This trend intensified after Volcafe adjusted its 2025/26 Brazil arabica production estimate down to 34.4 million bags, roughly 11 million bags lower than projected in September, following drought impact assessments. Volcafe predicts an arabica coffee deficit of 8.5 million bags for 2025/26, surpassing the 5.5 million bag shortfall expected for 2024/25.
Supporting these price movements, Safras & Mercado estimated Brazil’s 2025/26 coffee crop at 62.45 million bags, a 5% decrease from the previous year. They projected a 15% drop in arabica output to 38.35 million bags due to drought conditions, while robusta production is expected to remain at 24.1 million bags.
USDA Reports and Their Implications
The USDA’s biannual report prompted mixed reactions among coffee investors. They projected a 4% annual rise in world coffee production for 2024/25, reaching 174.855 million bags. Notably, arabica production is expected to rise by 1.5% to 97.845 million bags, and robusta production is foreseen to increase by 7.5% to 77.01 million bags. However, the USDA estimates indicate a 6.6% reduction in ending stocks for 2024/25, which could lead to tighter supplies.
Long-Term Weather Effects on Production
The previous year’s dry El Niño weather may have lasting effects on coffee crops in South and Central America. Brazil is experiencing its driest conditions since 1981, negatively affecting coffee trees during critical growth phases. Meanwhile, Colombia, the second-largest arabica producer, is experiencing a slow recovery from last year’s drought.
Vietnam’s Production Status and Global Export Dynamics
Robusta production in Vietnam has been negatively impacted by drought, with a 20% decline in the 2023/24 crop year, resulting in output of 1.472 MMT, the lowest in four years. The USDA projects slight variations down to 27.9 million bags for the upcoming marketing year, while the Vietnam Coffee and Cocoa Association has raised its estimate for 2024/25 to 28 million bags from 27 million earlier.
Global Coffee Export Trends
Reports of increasing global coffee exports weigh on prices. On December 5, the International Coffee Organization (ICO) noted a 15.1% year-on-year rise in October coffee exports for the beginning of the 2024/25 season, totaling 11.13 million bags. For the 2023/24 period, total exports increased by 11.7% to reach 137.27 million bags. Brazilian exports contributed to the bearish outlook, with Cecafe reporting a 2.7% increase in green coffee exports, totaling 4.29 million bags.
Production Surplus Slightly Eases Prices
The ICO indicated a record global coffee production of 178 million bags for 2023/24, marking a 5.8% increase year-on-year. Consumption also reached a record high of 177 million bags, contributing 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 are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
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