Coffee Prices Experience Divergence Amidst Varying Supply Dynamics

May arabica coffee (KCK25) rose by +6.50 (+1.77%) today, while May ICE robusta coffee (RMK25) declined by -67 (-1.28%).

Overall, coffee prices are showing mixed results, with robusta dropping to a one-week low. Today’s increase in arabica coffee prices is largely attributed to the strength of the Brazilian real (^USDBRL), which reached a two-week high against the dollar. This positive movement in the currency discourages export selling from Brazilian coffee producers. However, gains in arabica coffee are somewhat restrained, as robusta faces pressure from rising coffee supplies. Recently, ICE-monitored robusta coffee inventories have climbed to a one-week high of 4,272 lots, while arabica coffee inventories have increased to a five-week high of 801,549 bags as of Monday.

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The current global trade turmoil is negatively impacting many commodity prices, including coffee. Concerns are growing that demand for coffee might decline due to higher tariffs increasing prices for U.S. consumers.

Recently, coffee prices saw a rally, with arabica reaching a two-week high last Thursday and robusta climbing to a three-week high the week before. However, Brazil’s below-average rainfall poses a risk to coffee yields. Somar Meteorologia reported that the country’s primary arabica coffee region, Minas Gerais, received only 17.9 mm of rain during the week ending April 12, representing just 89% of its historical average.

Concerns over supply support higher coffee prices. On April 9, Cecafe reported that Brazil’s green coffee exports for March decreased by 26% year-over-year to 2.95 million bags. Furthermore, Brazil’s government crop forecasting agency, Conab, projected in January that the country’s 2025/26 coffee crop would fall by 4.4% year-over-year to a three-year low of 51.81 million bags. They also revised their 2024 crop estimate down by 1.1% to 54.2 million bags from an earlier estimate of 54.8 million bags.

Support for coffee prices also comes from Cooxupe, Brazil’s largest arabica coffee cooperative, which noted that high temperatures and insufficient rainfall last month would hurt yields this year. As the world’s largest arabica coffee producer, Brazil’s output is crucial.

On the negative side, Marex Solutions indicated on March 7 that the global coffee surplus in the 2025/26 season is expected to expand to 1.2 million bags, compared to a surplus of just 200,000 bags in the 2024/25 season.

Meanwhile, increased global supplies weigh on robusta coffee prices. Marex projects that Vietnam’s 2025/26 robusta production will rise to 28.8 million bags, reflecting a 7.9% year-over-year increase, while Brazil’s production is set to grow to 25 million bags, up 13.6% year-over-year.

The previous dry conditions from last year’s El Nino may have long-term negative implications for coffee crops across South and Central America. Brazil has experienced consistently below-average rainfall since last April, which has harmed coffee trees, particularly during the critical flowering period. The country is currently facing its driest weather since 1981, according to Cemaden, the national disaster monitoring center. Additionally, Colombia, the second-largest arabica producer globally, is gradually emerging from last year’s El Nino-induced drought.

Robusta coffee has support stemming from decreased production. Vietnam’s coffee output for the 2023/24 crop year has dropped by 20% to 1.472 million metric tons—the smallest yield in four years. Reports indicate that Vietnam’s coffee exports for 2024 decreased by 17.1% year-over-year to 1.35 million metric tons. Furthermore, the Vietnam Coffee and Cocoa Association cut its coffee production estimate for 2024/25 to 26.5 million bags from a prior estimate of 28 million bags. In addition, the Vietnam Customs Department observed a 15.3% decline in January to March coffee exports compared to last year, totaling 495,780 metric tons.

News about increased global coffee exports poses a bearish outlook for prices. Conab reported on February 4 that Brazil’s 2024 coffee exports rose by 28.8% year-over-year, hitting a record of 50.5 million bags. However, the International Coffee Organization (ICO) noted that global coffee exports in December fell by 12.4% year-over-year to 10.73 million bags, while total global exports for October-December were down 0.8% year-over-year, totaling 32.25 million bags.

The USDA’s biannual report released on December 18 was mixed in its implications for coffee prices. The USDA’s Foreign Agriculture Service (FAS) projected an increase of 4.0% year-over-year in world coffee production for 2024/25, totaling 174.855 million bags. Among this, arabica production is expected to rise by 1.5% to 97.845 million bags, and robusta production will increase by 7.5% to 77.01 million bags. The USDA’s FAS also forecast that the ending stocks for 2024/25 would drop by 6.6% to a 25-year low of 20.867 million bags, compared to 22.347 million bags in 2023/24. Separately, in a forecast dated November 22, the USDA’s FAS estimated Brazil’s 2024/25 coffee production at 66.4 million bags, lower than the previous forecast of 69.9 million bags. It further predicts Brazil’s coffee inventories for the end of the 2024/25 season at 1.2 million bags, down 26% year-over-year.

For the 2025/26 marketing year, Volcafe on December 17 adjusted its Brazil arabica coffee production estimate down to 34.4 million bags, a reduction of about 11 million bags from a prior estimate following a crop tour indicating severe drought conditions in Brazil. Volcafe also projects a global arabica coffee deficit of 8.5 million bags for the 2025/26 season, a notable increase from the 5.5 million bag deficit for 2024/25, marking the fifth consecutive year of deficits.

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
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.