Mixed Signals for Coffee Prices Amid Weather Woes and Growing Exports

March arabica coffee (KCH25) today rose by +2.85 (+0.88%), while January ICE robusta coffee (RMF25) saw a decline of -10 (-0.20%).

Weather Impacts Coffee Production in Brazil

Support for arabica coffee prices stems from below-average rainfall in Brazil, the leading producer globally. According to Somar Meteorologia, the Minas Gerais region, which grows most of the country’s arabica coffee, received only 43.6 mm of rain last week—this amounts to just 83% of the historical average.

Mixed Market Responses Amid Currency Trends

Coffee prices displayed a mixed performance on Friday, buoyed somewhat by a weaker dollar. Last week, the consultancy Safras & Mercado projected Brazil’s 2025/26 coffee crop at 62.45 million bags, a decline of -5% from the previous year. They expect arabica production to drop by -15% year-over-year to 38.35 million bags, attributing this to ongoing drought conditions, while robusta production is estimated at 24.1 million bags.

Currency Fluctuations and Inventory Levels

Today, the Brazilian real (^USDBRL) fell by -1.2%, remaining slightly above the record low noted on Wednesday. A weaker real tends to promote increased export activity among Brazilian coffee growers. Additionally, arabica coffee supplies have increased recently, with ICE-monitored arabica inventories climbing to a 2.5-year high of 985,990 bags last Friday. Similarly, robusta coffee inventories rose to a two-month high of 3,996 lots, up from 3,672 lots just the week prior.

Recent Price Rallies Driven by Crop Concerns

Over the last two weeks, coffee prices have surged as fears grow over a smaller coffee crop in Brazil. March arabica reached a contract high last Tuesday, even as the nearest-dec. coffee futures contract also achieved a record high. That same day, Volcafe revised its 2025/26 estimate for Brazil’s arabica production down to 34.4 million bags—down roughly 11 million bags from a previous estimate—prompted by the effects of an extended drought on crop health. Volcafe predicts a global arabica coffee deficit of 8.5 million bags for 2025/26, widening from the 5.5 million bag deficit for 2024/25, marking the fifth consecutive year of deficits.

USDA Report Provides Mixed Outlook

A bi-annual report from the USDA offered a mixed outlook for coffee prices. The USDA’s Foreign Agricultural Service (FAS) estimated that world coffee production in 2024/25 would rise by +4.0% year-over-year to 174.855 million bags, driven by a +1.5% increase in arabica production and a +7.5% leap in robusta output. However, forecasts show that ending stocks could decrease by -6.6% to a 24-year low of 20.867 million bags.

Vietnam’s Production Struggles Affecting Robusta

Robusta coffee prices are feeling pressure from diminished supplies in Vietnam, where November coffee exports plunged -47% year-over-year, totaling 63,019 MT. The 2023/24 crop year saw Vietnam’s production drop by -20% to 1.472 MMT, marking the lowest harvest in four years. Meanwhile, the Vietnam Coffee and Cocoa Association has slightly adjusted its 2024/25 production estimate up to 28 million bags.

Global Exports Pose a Challenge for Coffee Prices

The recent surge in global coffee exports could weigh on prices. The International Coffee Organization (ICO) reported a +15.1% increase in global exports for October to 11.13 million bags. Brazil’s green coffee exports also showed a positive trend, with a +2.7% rise to 4.29 million bags; their overall exports reached a record 47.3 million bags in 2023/24.

Record Production and Consumption Create Surplus Conditions

Additionally, the ICO noted a +5.8% increase in global coffee production for 2023/24, totaling a record 178 million bags, and a +2.2% rise in consumption, resulting in a 1 million bag surplus.

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.