Coffee Prices Surge Amid Supply Worries
On Thursday, March arabica coffee (KCH25) rose by +6.85 (+1.87%), while March ICE robusta coffee (RMH25) increased by +125 (+2.23%).
Continuing an upward trend this week, coffee prices reached new highs. Arabica coffee hit a record for the nearest-futures while robusta prices climbed to a two-month peak. This price rally is largely driven by concerns about tight global coffee supplies. Brazil’s government crop forecasting agency, Conab, projected a -4.4% year-over-year decrease for the country’s 2025/26 coffee crop, bringing the estimate to a three-year low of 51.81 million bags. Additionally, Conab revised its 2024 coffee crop forecast down by -1.1%, adjusting it to 54.2 million bags from an earlier estimate of 54.8 million bags.
This situation is further complicated by below-normal rainfall in Brazil. According to Somar Meteorologia, the major arabica-growing region of Minas Gerais received only 26.5 mm of rain last week, which is just 53% of the historical average.
The ongoing effects of last year’s dry El Niño weather may pose long-term damage to coffee crops in South and Central America. Since April, Brazil has experienced consistently low rainfall, impacting coffee trees during crucial flowering stages and thereby threatening the 2025/26 arabica crop. The natural disaster monitoring center Cemaden reports that Brazil is experiencing its driest weather conditions since 1981. Moreover, Colombia, the world’s second-largest arabica producer, is gradually recovering from drought conditions caused by the same El Niño last year.
Global supply shortages continue to support coffee prices and attract fund investments in the market. On December 17, Volcafe lowered its forecast for Brazil’s 2025/26 arabica production to 34.4 million bags, a drop of approximately 11 million bags from earlier estimates. Volcafe now anticipates a global deficit of -8.5 million bags for 2025/26, an increase from the -5.5 million bag deficit predicted for 2024/25. This marks the fifth consecutive year of coffee supply deficits.
Prices for robusta coffee are also being influenced by reduced production. Vietnam’s coffee output is expected to drop by -20% to 1.472 million metric tons during the 2023/24 crop year, making it the smallest harvest in four years. The USDA Foreign Agricultural Service (FAS) forecasted that Vietnam’s production for the new marketing year of 2024/25 will see a slight decrease to 27.9 million bags, down from 28 million bags in 2023/24. Nonetheless, the Vietnam Coffee and Cocoa Association raised its 2024/25 production estimate to 28 million bags, up from an October projection of 27 million bags.
However, increased inventories of robusta coffee may put downward pressure on prices. ICE-monitored robusta inventories rose to a three-and-three-quarter-month high of 4,603 lots last Friday. On the other hand, arabica coffee inventories initially climbed to a two-and-a-half-year high of 993,562 bags on January 6 but have since decreased to a two-month low of 885,886 bags as of Thursday.
Other news impacting market sentiment includes an increase in global coffee exports, which tends to press prices downward. Conab reported that Brazil’s coffee exports in 2024 surged by +28.8% year-over-year, setting a record at 50.5 million bags.
In broader market analysis, the International Coffee Organization (ICO) disclosed that global coffee production for 2023/24 rose by +5.8% year-over-year, reaching a record 178 million bags, driven by an exceptional off-biennial crop year. In contrast, global consumption also increased by +2.2% year-over-year to a historic 177 million bags, resulting in a surplus of 1 million bags.
The USDA’s biannual report dated December 18 presented a mixed outlook for coffee prices. The USDA’s FAS predicts that world coffee production will increase by +4.0% year-over-year to 174.855 million bags for 2024/25, with arabica production expected to rise by +1.5% to 97.845 million bags and robusta production seeing a larger jump of +7.5% to 77.01 million bags. However, ending stocks for 2024/25 are projected to decrease by -6.6% to 20.867 million bags, the lowest in 25 years. Separate forecasts from the USDA on November 22 suggested that Brazil’s coffee production will be lower than previously estimated at 66.4 million metric tons, down from 69.9 million metric tons. The USDA estimated Brazil’s coffee inventories will reach 1.2 million bags at the end of the 2024/25 season in June, representing a -26% year-over-year decline.
On the date of publication, Rich Asplund did not hold any positions in the securities mentioned. All information and data presented are solely for informational purposes. Please refer to the Barchart Disclosure Policy here.
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The views expressed in this article are those of the author and do not necessarily reflect those of Nasdaq, Inc.
