Coffee Prices Dip Amid Supply Concerns and Changing Weather Patterns
On Monday, May arabica coffee (KCK25) ended down -4.45 (-1.14%), while March ICE robusta coffee (RMH25) fell -154 (-2.70%).
Market Trends Reflect Long Liquidation
Prices for coffee dipped on Monday, pressured by continued long liquidation. New York coffee eased to a 2-1/2 week low, unraveling gains made in the rally from late January to early February.
Rising Inventories Weigh on Arabica Prices
The recent decline in arabica prices was influenced by a surge in ICE-monitored arabica inventories, which climbed to 792,695 bags on Monday from last Tuesday’s 9-month low of 758,514 bags.
In contrast, ICE-monitored robusta inventories hit a 4-3/4 month high of 4,603 lots on January 31, only to decrease to a 1-3/4 month low of 4,297 lots by February 18. Currently, robusta inventories stand at 4,321 lots.
Weather Conditions Impacting Brazil’s Coffee Crop
Below-average rainfall in Brazil has contributed to price support. According to Somar Meteorologia, Minas Gerais, Brazil’s primary arabica coffee region, only saw 11.4 mm of rain last week, or 24% of its historical average. Brazil remains the world’s leading arabica coffee producer.
Sales Trends Indicate Supply Tightening
In a positive sign for prices, a higher percentage of Brazil’s coffee harvest has already been sold compared to previous years. Safras & Mercado noted that by February 11, producers had sold 88% of Brazil’s 2024/25 coffee harvest. This is notably quicker than last year’s figure of 79% and the 5-year average of 82%. However, sales of the 2025/26 crop are lagging at just 13%, well behind the 4-year average of 22%, suggesting concerns about available supply.
Export Declines and Crop Forecasts Raise Alarm
Persistent supply concerns have supported coffee prices. Cecafe reported a year-over-year drop of -1.6% in Brazil’s January green coffee exports, totaling 3.98 million bags. Additionally, on January 28, Brazil’s government crop forecasting agency, Conab, projected a -4.4% decrease for the 2025/26 coffee crop, predicting it will fall to a 3-year low of 51.81 million bags. Conab also reduced its 2024 estimate by -1.1% to 54.2 million bags from 54.8 million bags.
Long-Term Effects of El Nino Weather
The repercussions of dry El Nino conditions experienced last year could cause lasting damage to coffee crops in South and Central America. Brazil has faced its driest weather in over four decades, according to Cemaden, which has adversely affected coffee trees during critical growth stages. In Colombia, the second-largest arabica producer, recovery from the drought continues slowly.
Robusta Production Faces Drought Challenges
Robusta coffee prices remain strong due to reduced production. Vietnam’s coffee harvest for the 2023/24 season dropped by -20% to 1.472 million metric tons, marking four years of decline. The USDA FAS projected that robusta production in Vietnam for the 2024/25 season will slightly decrease to 27.9 million bags, down from 28 million bags in 2023/24. Interestingly, the Vietnam Coffee and Cocoa Association recently increased its 2024/25 production estimate to 28 million bags.
Global Export Changes Affect Market Dynamics
There have been reports of increasing global coffee exports, which could weigh on prices. Conab noted that Brazil’s 2024 coffee exports surged by +28.8% year-over-year to a record 50.5 million bags. Concurrently, Vietnam reported a +6.3% month-over-month increase in January coffee exports, totaling 134,000 metric tons. However, the International Coffee Organization reported a -12.4% year-over-year decline in December global coffee exports, totaling 10.73 million bags.
USDA Reports Provide Mixed Outlook
The USDA’s biannual report, released on December 18, yielded a mixed outlook for coffee prices. The FAS anticipated a +4.0% year-over-year increase in global coffee production for the 2024/25 season, 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. However, the USDA also forecast a -6.6% decline in ending stocks, predicting a drop to a 25-year low of 20.867 million bags.
Serious Deficits Loom for Future Production
For the 2025/26 marketing year, Volcafe cut its Brazil arabica coffee production estimate to 34.4 million bags, nearly 11 million bags lower than its previous assessment due to drought severity. It indicates a global arabica coffee deficit of -8.5 million bags for 2025/26, surpassing the -5.5 million bag deficit projected for the 2024/25 season, 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
here.
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