Coffee Market Sees Mixed Prices Amid Weather Challenges
On Monday, March arabica coffee (KCH25) closed down -0.15 (-0.05%), while January ICE robusta coffee (RMF25) rose +93 (+1.80%).
Brazil’s Increased Exports Lead to Mixed Coffee Prices
Coffee prices showed a mixed trend on Monday. March arabica coffee dropped slightly from a recent contract high, primarily due to a bump in Brazil’s coffee exports. Cecafe announced that Brazil’s green coffee exports increased by +2.7% year-on-year, reaching 4.29 million bags.
Robusta Coffee Rises Amid Production Concerns in Vietnam
In contrast, robusta coffee experienced a rally. This was partly due to news from last Thursday, when the Vietnam General Statistics Office revealed that Vietnam’s November coffee exports plummeted -49.1% year-on-year to 60,000 metric tons. Furthermore, total coffee exports from January to November saw a decline of -14.3% year-on-year at 1.2 million metric tons. Heavy rainfall in Vietnam has flooded coffee fields and impacted the ongoing robust coffee harvest.
Weather Woes Weighing on Global Coffee Production
Price surges in the coffee market have been influenced by adverse weather conditions in Brazil and Vietnam, the top two coffee producers globally. Sucden Financial highlighted that this surge is prompting Brazilian coffee exporters to close their hedges and purchase coffee futures to manage short positions, consequently driving prices higher.
Long-Term Effects of El Niño on Coffee Crops
The dry weather experienced from the El Niño phenomenon earlier this year could have lasting effects on coffee crops in South and Central America. Since April, Brazil has reported below-average rainfall, affecting the coffee trees during their critical flowering stage. As a result, the outlook for Brazil’s 2025/26 arabica coffee crop is concerning. Cemaden, the natural disaster monitoring center, noted that this is the driest weather Brazil has faced since 1981. Meanwhile, Colombia, the second-largest arabica producer in the world, is gradually recovering from a drought caused by the same climatic pattern.
Rainfall Levels as an Indicator of Future Production
The lack of adequate rainfall in Brazil could further decrease coffee output, boosting prices in the process. According to Somar Meteorologia, Minas Gerais, the country’s largest arabica coffee-producing region, received only 60.9 mm of rain last week, which is just 91% of the historical average.
Vietnam’s Coffee Production Faces Challenges
Robusta coffee prices are also supported by diminished production levels in Vietnam. For the 2023/24 crop year, Vietnam’s coffee output is anticipated to drop by -20% to 1.472 million metric tons, marking the lowest yield in four years. The USDA Foreign Agricultural Service (FAS) projected that Vietnam’s robusta production for the 2024/25 marketing year will decrease slightly to 27.9 million bags from 28 million bags for the 2023/24 season. In contrast, the Vietnam Coffee and Cocoa Association recently raised its 2024/25 production estimate to 28 million bags, up from an earlier estimate of 27 million bags.
Coffee Production Forecasts and Their Impact on Prices
Support for coffee prices has also emerged from projections regarding Brazil’s coffee output. On November 22, the USDA’s FAS estimated Brazil’s coffee production for 2024/25 at 66.4 million bags, a reduction from an earlier forecast of 69.9 million bags. Additionally, Brazil’s coffee inventories are expected to fall by -26% year-on-year to 1.2 million bags at the end of the 2024/25 season in June.
Global Coffee Supply and Demand Dynamics
Although there are some bearish factors in the coffee market, such as the International Coffee Organization’s (ICO) recent projection that global coffee production for 2023/24 will jump +5.8% year-on-year to reach a record 178 million bags, signs of an increasing global coffee supply can impact prices negatively. The ICO also estimated that coffee consumption would rise +2.2% year-on-year, leading to a 1 million bag surplus.
USDA Projections Show Possible Future Increases
The USDA’s bi-annual report released on June 20 echoed this bearish sentiment. It predicted that worldwide coffee production in 2024/25 would rise +4.2% year-on-year to 176.235 million bags, citing increases in both arabica and robusta production. Ending stocks for 2024/25 are expected to increase by +7.7% to reach 25.78 million bags, up from 23.93 million bags in 2023/24.
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 here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
