Coffee Prices See Mixed Results Amid Production Concerns

On Monday, July arabica coffee (KCN25) closed up +2.00 (+0.58%), while July ICE robusta coffee (RMN25) fell -34 (-0.75%).

Overall, coffee prices ended the day mixed, with robusta reaching a 6-3/4 month low.

Production Forecasts Pressure Prices

Recent pressures on coffee prices stem from expectations of increased production. The USDA’s Foreign Agricultural Service (FAS) projected that Brazil’s coffee production for the 2025/26 season will rise by 0.5% year-over-year (y/y) to 65 million bags. Vietnam is also expected to increase its output by 6.9% y/y to 31 million bags, maintaining its position as the top robusta producer.

Weather Impacting Arabica Coffee

Despite recent declines, arabica coffee prices rebounded from an 8-week low due to concerns over poor weather in Brazil affecting crop yields. Somar Meteorologia reported that Brazil’s largest arabica-growing region, Minas Gerais, received no rain in the week ending May 31.

Inventory Levels Affect Market

Rising coffee inventories at ICE contributed to price declines. As of May 30, robusta inventories reached an 8-1/2 month high of 5,438 lots. Additionally, arabica coffee inventories peaked at a 4-month high of 892,468 bags last Tuesday.

Regional Production Insights

For the 2025/26 season, the USDA also forecasted a +5.1% y/y increase in Honduras coffee production to 5.8 million bags. Meanwhile, consulting firm Safras & Mercado raised its estimate for Brazil’s production to 65.51 million bags from 62.45 million. Brazil’s crop forecasting agency, Conab, also adjusted its estimate upward to 55.7 million bags from 51.81 million.

Demand Concerns Persist

Weak demand signals are applying downward pressure on coffee prices. Major importers like Starbucks, Hershey, and Mondelez International indicated that the U.S.’s 10% tariff on imports could elevate prices and hurt sales volumes.

Export Trends in Brazil

Lower coffee exports from Brazil are creating some upward pressure on prices. In April, green coffee exports dropped -28% y/y to 3.05 million bags. From January to April, exports fell -15.5% y/y total 13.186 million bags.

Robusta Production Issues

Robusta coffee prices are finding some support due to reduced production. A drought in Vietnam has resulted in a -20% drop in coffee output for the 2023/24 crop year, marking the smallest crop in four years. The Vietnamese coffee production estimate for 2024/25 was also revised down to 26.5 million bags from a prior 28 million bags. In contrast, Rabobank anticipates that Brazil’s robusta crop could rise by +7.3% y/y to a record 24.7 million bags.

USDA Reports Mixed Outlook

The USDA’s biannual report on December 18 provided a mixed outlook for coffee prices. It projected a +4.0% y/y increase in world coffee production for 2024/25 to 174.855 million bags. This includes a +1.5% increase in arabica production, reaching 97.845 million bags, and a +7.5% rise in robusta, totaling 77.01 million bags. Ending stocks are expected to decrease by -6.6% to a 25-year low of 20.867 million bags.

Previously, the USDA lowered its forecast for Brazil’s 2024/25 coffee production to 66.4 million bags, below an earlier estimate of 69.9 million.

Future Projections

For the 2025/26 marketing year, Volcafe cut its estimate for Brazil’s arabica production to 34.4 million bags, down about 11 million bags from September projections. Volcafe anticipates a global arabica coffee deficit of -8.5 million bags in 2025/26, widening from the -5.5 million bag deficit expected for 2024/25.

On the publication date, Rich Asplund held no positions in any mentioned securities. All information is for informational purposes. For more details, please see the Barchart Disclosure Policy.

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Views expressed are those of the author and do not necessarily reflect those of Nasdaq, Inc.