Coffee Market Update: Arabica Rises Amid Supply Concerns, Robusta Declines
Price Trends Mixed as Arabica Hits Three-Week High
March arabica coffee (KCH25) today is up +1.35 (+0.42%), while March ICE robusta coffee (RMH25) has decreased by -60 (-1.21%). Coffee prices are showing mixed signals; arabica has climbed to a three-week high, whereas robusta has fallen to a one-week low. The dry conditions in Brazil are benefiting arabica coffee, following a report from Somar Meteorologia that indicated the country’s key coffee-producing region of Minas Gerais received only 29.6 mm of rain last week—31% of the historical average. In contrast, robusta coffee has declined for the second consecutive session, impacted negatively by last Friday’s report from the General Department of Vietnam Customs, which revealed coffee exports from Vietnam surged by +102.6% year-on-year to 127,655 metric tons in December.
Inventories Expand, Pressuring Coffee Prices
Increasing coffee inventories are signaling bearish trends for prices. Last Monday, ICE-monitored arabica coffee inventories climbed to a 2.5-year high of 993,562 bags, while robusta coffee inventories hit a three-month high of 4,415 lots last Wednesday. Last month’s coffee price surge can be attributed to expectations of a smaller Brazilian coffee crop, particularly in arabica. The March arabica contract reached a high, and the December nearest-futures contract (Z24) set a record. The outlook for diminished coffee production in Brazil weighed heavily on prices after Volcafe revised its 2025/26 arabica coffee output estimate down to 34.4 million bags, reflecting an 11 million bag reduction since September. The forecast predicts an arabica coffee deficit of 8.5 million bags for 2025/26, marking the fifth consecutive year of deficits.
Long-term Weather Challenges Ahead for South America
Consultancy group Safras & Mercado has also revised its Brazilian coffee crop estimate for 2025/26 to 62.45 million bags, marking a 5% year-on-year decrease. Safras reports that arabica production could drop by 15% year-on-year to 38.35 million bags due to drought conditions, while robusta production remains estimated at 24.1 million bags. The long-lasting effects of dry El Niño weather may cause lasting damage to coffee crops in South and Central America. Since last April, Brazilian rainfall has been consistently below average, harming coffee trees during their crucial flowering phase—a situation exacerbated by the country experiencing its driest weather since 1981, according to Cemaden, a natural disaster monitoring center. Colombia is slowly recovering from last year’s El Niño-induced drought, as it is the world’s second-largest arabica producer.
Vietnam’s Production Drops Amid Global Coffee Supply Increase
Robusta coffee prices have resiliently held in light of reduced production forecasts. Drought conditions have caused Vietnam’s coffee output to fall by 20% for the 2023/24 crop year, totaling 1.472 million metric tons—the lowest yield in four years. The USDA Foreign Agriculture Service (FAS) projected a slight decline for Vietnam’s robusta production in the 2024/25 marketing year, forecasting 27.9 million bags, down from 28 million bags in 2023/24. Meanwhile, the General Statistics Office of Vietnam reported that 2024 coffee exports were down by 17.1% year-on-year to 1.35 million metric tons. However, the Vietnam Coffee and Cocoa Association recently upgraded its 2024/25 production estimate from 27 million to 28 million bags, reinforcing Vietnam’s status as the world’s foremost robusta producer.
Global Export Trends and Production Insights
The increase in global coffee exports presents a bearish outlook for prices. The International Coffee Organization (ICO) reported that global coffee exports for October rose by +15.1% year-on-year to 11.13 million bags at the beginning of the 2024/25 season, with total exports for the 2023/24 season reaching 137.27 million bags, reflecting an increase of +11.7% year-on-year. Brazil’s export figures also indicate rising volumes; Cecafe stated that Brazil’s green coffee exports increased by +2.7% year-on-year to 4.29 million bags, and 2023/24 exports surged to a new record of 47.3 million bags, marking a +33% year-on-year growth.
Global Coffee Production Record and Future Projections
In a more bearish development, ICO reported that global coffee production for the 2023/24 season climbed by +5.8% year-on-year to reach a record 178 million bags, attributable to an exceptional off-biennial crop year. Furthermore, global coffee consumption also rose, reaching a record 177 million bags, resulting in a coffee surplus of 1 million bags. The USDA’s biannual report, delivered on December 18, presented a mixed view for coffee prices. It projected a +4.0% increase in world coffee production for the 2024/25 season to 174.855 million bags, with arabica production rising by +1.5% to 97.845 million bags and robusta production expected to increase by +7.5% to 77.01 million bags. Also noteworthy, the projected ending stocks for 2024/25 are set to decline by -6.6% to a 24-year low of 20.867 million bags, down from 22.347 million bags in 2023/24. The USDA also revised its Brazil production forecast down to 66.4 million bags for 2024/25, compared to a previous estimate of 69.9 million bags, predicting coffee inventories in Brazil to drop by -26% year-on-year to 1.2 million bags by the end of the 2024/25 season in June.
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.
