Mixed Coffee Prices with Rising Arabica, Declining Robusta
March arabica coffee (KCH25) increased by +6.40 (+1.97%), while January ICE robusta coffee (RMF25) fell by -36 (-0.60%).
Coffee prices today displayed a mixed pattern, highlighted by arabica reaching a one-week high. Support for coffee prices comes from dry weather conditions in Brazil, the leading global producer of arabica coffee. According to Somar Meteorologia, the Minas Gerais region, Brazil’s biggest arabica growing area, received only 35.2 mm of rain last week—65% of its average. This region plays a crucial role in the country’s coffee production.
Meanwhile, robusta coffee is facing downward pressure due to increased inventories at ICE. Last week, robusta coffee inventories climbed to a four-week high of 3,912 lots, recovering after a drop to a 7.5-month low of 3,672 lots on Monday.
The Brazilian real (^USDBRL) is experiencing weakness, currently down -1.22% and approaching its record low against the dollar from Tuesday. This devaluation encourages coffee producers in Brazil to sell their exports, adding to the supply in the market.
Furthermore, arabica coffee faces bearish conditions due to current supply increases, with ICE-monitored arabica inventories reaching a 2.5-year high of 949,231 bags on Tuesday.
In recent weeks, coffee prices have surged significantly due to a forecast for a smaller coffee harvest in Brazil. Last Tuesday, March arabica hit a contract high, and the December coffee nearest-futures contract (Z24) reached a record high. Reports from Volcafe indicated a decrease in predictions for Brazil’s arabica production for 2025/26, now estimated at 34.4 million bags—11 million less than prior estimates. This is attributed to a severe drought revealed during a crop tour. Volcafe also projects a global arabica coffee shortage of 8.5 million bags for 2025/26, an increase from 5.5 million bags in 2024/25. This consecutive trend of shortages suggests continued pressure on prices.
The price rise has also influenced Brazilian coffee exporters, prompting them to unwind their hedges and purchase coffee futures to offset short positions, which further pushes prices upward.
Contrastingly, robusta coffee finds support in reduced supplies from Vietnam. The country’s coffee exports plummeted by -47% year-on-year in November to 63,019 metric tons, with total exports for January to November down by -14% to 1.22 million metric tons. Recent rains in Vietnam have flooded coffee farms and delayed the harvest for robusta coffee, as the nation starts its production season.
Moreover, the long-term effects of dry El Niño weather this year may result in damages to coffee crops across South and Central America. The rainfall in Brazil has been below average since April, affecting vital stages in coffee trees and diminishing prospects for the 2025/26 arabica crop. According to Cemaden, Brazil is experiencing its driest conditions since 1981. In Colombia, the second-largest arabica producer, recovery from the drought related to El Niño is ongoing.
Despite these factors, uncertainties surrounding the potential crop damage in Brazil may restrain further price increases. Neuman Gruppe GmbH recently suggested that the 2025/26 arabica crop in Brazil might reach around 40 million bags, higher than Volcafe’s earlier forecast of 34.4 million bags, stating that it was still “too early” to accurately evaluate the situation.
Robusta coffee prices remain supported by diminished production. Following drought conditions, Vietnam’s production for the 2023/24 crop year fell by -20% to 1.472 million metric tons, marking the lowest output in four years. Projections from the USDA FAS predict Vietnam’s robusta coffee production for the 2024/25 marketing year will see a slight drop to 27.9 million bags, down from 28 million bags in the 2023/24 season. In contrast, the Vietnam Coffee and Cocoa Association raised its 2024/25 coffee production forecast to 28 million bags, increasing from an October estimate of 27 million bags.
Support for coffee prices also stems from the USDA’s Foreign Agricultural Service (FAS) report on November 22, which estimated Brazil’s coffee production for 2024/25 at 66.4 million metric tons—lower than the previous forecast of 69.9 million metric tons. Brazil’s coffee inventories are projected to drop to 1.2 million bags at the end of the 2024/25 season, a -26% year-on-year decrease.
On the global front, bearish signals indicate an increase in coffee supplies. The International Coffee Organization (ICO) reported on December 5 that global coffee exports rose +15.1% year-on-year in October, totaling 11.13 million bags for the start of the 2024/25 season, while overall coffee exports for 2023/24 increased +11.7% to 137.27 million bags.
Further bearish news came from Brazil’s coffee export data. Cecafe reported that Brazil’s green coffee exports climbed +2.7% year-on-year to 4.29 million bags. For the 2023/24 season, Brazil’s total coffee exports surged +33% to a record 47.3 million bags.
Lastly, the ICO anticipates that 2023/24 global coffee output will reach a record of 178 million bags, up +5.8% year-on-year. Meanwhile, the forecast for global coffee consumption stands at 177 million bags, reflecting a +2.2% annual increase, leading to a mild surplus of 1 million bags.
Earlier this year, the USDA’s bi-annual report on June 20 forecasted that global coffee production for 2024/25 would see an increase of +4.2% year-on-year, totaling 176.235 million bags. This includes a +4.4% rise in arabica production to 99.855 million bags and a +3.9% increase in robusta production to 76.38 million bags. In addition, ending stocks for 2024/25 are expected to rise by +7.7% to 25.78 million bags, compared to 23.93 million bags in 2023/24.
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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