Coffee Prices Fluctuate Amidst Supply Concerns and Weather Issues

On Monday, May arabica coffee (KCK25) closed higher at +2.00 (+0.51%). In contrast, May ICE robusta coffee (RMK25) fell to -14 (-0.25%). Coffee prices exhibited a mixed trend as arabica reached a two-week high, driven primarily by weather-related concerns in Brazil. Cooxupe, Brazil’s largest arabica coffee cooperative, reported that elevated temperatures and below-normal rainfall in the past month could adversely affect this year’s coffee yields. Further tightening in current supplies is evident as ICE-monitored arabica coffee inventories dropped to a one-month low of 777,708 bags last Friday.

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Robusta coffee faces downward pressure due to a surge in supplies. ICE-monitored robusta coffee inventories increased to a six-week high of 4,360 lots last Friday. Additionally, the dollar index (DXY00) saw a rally to a two-week high, contributing to bearish sentiment for coffee prices.

A supportive element for robusta coffee is emerging crop concerns in Vietnam. The Dak Lak weather office indicated that hot temperatures and reduced rainfall are expected in Vietnam’s primary coffee-producing region, the Central Highlands, from March 21 to 31. Vietnam holds the position as the world’s largest producer of robusta coffee beans.

Positive developments in Brazil show higher-than-normal rainfall, which alleviates dry conditions and is bullish for prices. Somar Meteorologia reported that Minas Gerais, Brazil’s leading arabica coffee growing area, received 31.2 mm of rain during the week ending March 22, amounting to 102% of the historical average.

Ongoing supply concerns are propelling coffee prices higher. Cecafe reported a 12% year-over-year decrease in Brazil’s February green coffee exports, totaling three million bags. Additionally, Conab, Brazil’s government crop forecasting agency, projected a 4.4% year-over-year decline in Brazil’s 2025/26 coffee crop, estimating a three-year low of 51.81 million bags. The agency also revised its 2024 Brazil coffee crop estimate, decreasing it by 1.1% from 54.8 million to 54.2 million bags.

However, a bearish outlook for coffee arises from Marex Solutions’ March 7 report predicting a widening global coffee surplus for the 2025/26 season, expected to reach 1.2 million bags, up from a mere surplus of 200,000 bags in the 2024/25 season.

Moreover, Vietnam’s General Statistics Office reported on March 6 that the country’s February coffee exports climbed 6.6% year-over-year to 169,000 metric tons, introducing additional bearish pressure on robusta coffee.

Dry El Niño weather experienced last year may result in long-lasting crop damage for coffee in South and Central America. Since April, rainfall in Brazil has consistently been below average, harming coffee trees during the critical flowering stage and diminishing prospects for Brazil’s arabica coffee crop in 2025/26. Reports indicate that Brazil is experiencing its driest conditions since 1981, according to the natural disaster monitoring center Cemaden. Meanwhile, Colombia, the second-largest arabica producer globally, is slowly recovering from the drought influenced by El Niño.

On the other hand, robusta coffee prices are supported by a decrease in production. Drought conditions have led to a 20% decline in Vietnam’s coffee production for the 2023/24 crop year, resulting in a total output of 1.472 million metric tons—the lowest in four years. The USDA Foreign Agricultural Service (FAS) projected a slight dip in Vietnam’s robusta coffee production for the marketing year 2024/25, estimating it to fall to 27.9 million bags from 28 million bags in the 2023/24 season. Additionally, Vietnam’s General Statistics Office noted a 17.1% year-over-year drop in coffee exports for 2024, totaling 1.35 million metric tons.

Conversely, news of increasing global coffee exports exerts downward pressure on prices. Conab noted an impressive 28.8% year-over-year rise in Brazil’s coffee exports for 2024, achieving a record 50.5 million bags. However, the International Coffee Organization (ICO) reported a 12.4% year-over-year decline in global coffee exports for December, totaling 10.73 million bags, and a minor decrease of 0.8% year-over-year to 32.25 million bags for the October-December quarter.

The USDA’s biannual report released on December 18 offered a mixed forecast for coffee prices. The USDA’s FAS estimated that world coffee production for the 2024/25 season would rise by 4.0% year-over-year to 174.855 million bags, with arabica production increasing by 1.5% to 97.845 million bags, and robusta production surging by 7.5% to 77.01 million bags. Ending stocks for 2024/25 have been projected to decrease by 6.6%, hitting a 25-year low at 20.867 million bags, down from 22.347 million bags in 2023/24. Furthermore, the USDA’s FAS indicated a revised Brazil coffee production forecast of 66.4 million metric tons for 2024/25, lower than its previous estimate of 69.9 million metric tons, estimating inventories at 1.2 million bags, which marks a 26% year-over-year decrease.

Looking ahead to the marketing year 2025/26, Volcafe on December 17 adjusted its Brazil arabica coffee production estimate downward to 34.4 million bags, which is a decline of about 11 million bags from prior estimates due to insights gained from a crop tour that highlighted the severity of the ongoing drought. Volcafe forecasts a global arabica coffee shortage of 8.5 million bags for 2025/26, widening from a 5.5 million bag deficit in 2024/25—marking the fifth consecutive year of deficits.

On the date of publication, Rich Asplund did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are intended solely for informational purposes. For more information, please view the Barchart Disclosure Policy.
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