Coffee Prices Experience Mixed Trends as Global Supply Concerns Persist
On Friday, March arabica coffee (KCH25) saw a modest increase of +0.40 (+0.10%), while March ICE robusta coffee (RMH25) recorded a decline of -72 (-1.28%).
Recent Price Movements Highlight Market Volatility
Despite a strong rally in coffee prices over the past month, Friday’s close showed a mixed trend. Arabica coffee reached an all-time nearest-futures high, while robusta set a record high just a week earlier. The stronger dollar contributed to some selling as investors adjusted their positions in coffee futures.
Concerns Over Global Supply Influence Prices
Lingering fears about global coffee supply continue to drive market behavior. Last Tuesday, Brazil’s government crop forecasting agency, Conab, projected a 4.4% year-over-year decline in the country’s 2025/26 coffee crop. This estimate anticipates a three-year low of 51.81 million bags. Additionally, Conab lowered its prediction for Brazil’s 2024 coffee crop to 54.2 million bags, down from 54.8 million bags in September.
Data from the International Coffee Organization (ICO) indicates that global coffee exports decreased substantially. December exports fell 12.4% year-over-year to 10.73 million bags, while October to December saw a slight dip of 0.8% to 32.25 million bags.
Currency Strength and Weather Conditions Affecting Coffee Production
The Brazilian real (^USDBRL) reached a two-and-a-half month high against the dollar, providing support for coffee prices. As the real strengthens, Brazilian coffee producers are less incentivized to sell internationally.
In contrast, a report from Vietnam indicated a rise in coffee exports, with January figures climbing 6.3% month-over-month to 134,000 metric tons. As the world’s largest robusta producer, Vietnam’s production plays a crucial role in the global coffee market.
Weather patterns provide a mixed bag for coffee farmers. Recent rainfall in Brazil, reported to be significantly above average at 119 mm last week, has eased concerns about drought. However, the impact of last year’s dry El Niño may still hinder longer-term production prospects, particularly in Brazil, which has faced its driest weather conditions since 1981. Colombia, too, is gradually recovering from the drought it experienced last year.
Production Shortfalls in Vietnam Impact Robusta Prices
Robusta coffee prices are supported by production cuts linked to drought conditions. Vietnam’s coffee output for the 2023/24 crop year fell by 20% to 1.472 million metric tons, marking the smallest crop in four years. Projections from the USDA Foreign Agriculture Service suggest that Vietnam’s robusta coffee production will decline slightly in the 2024/25 marketing year, while recent reports indicated a 17.1% year-over-year drop in 2024 coffee exports to 1.35 million metric tons.
Despite concerns about reduced production, inventories of robusta coffee are growing. The most recent figures show ICE-monitored robusta coffee inventories reached a four-month high of 4,603 lots last Friday. On the flip side, arabica inventories peaked at a two-and-a-half year high of 993,562 bags on January 6 but have since decreased to a three-month low of 847,805 bags.
Potential Bearish Factors Emerge
Further bearish news surfaced last Tuesday, when Conab announced a 28.8% year-over-year increase in Brazil’s 2024 coffee exports, reaching a record 50.5 million bags. Additionally, the ICO reported that global coffee production for 2023/24 surged by 5.8% to a record 178 million bags, leading to a surplus of 1 million bags despite consumption rising to an all-time high.
The USDA’s biannual report offered a mixed outlook. It projected a 4% year-over-year increase in global coffee production for 2024/25 to 174.855 million bags, with arabica production increasing by 1.5% and robusta by 7.5%. However, it also forecasted that ending stocks would drop by 6.6% to a 25-year low of 20.867 million bags.
Looking ahead to the 2025/26 marketing year, Volcafe reduced its estimate for Brazil’s arabica production to 34.4 million bags, revealing the extent of the drought’s impact. It also projects a global deficit of 8.5 million bags for arabica coffee, extending the trend of supply shortfalls for five consecutive years.
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 are solely for informational purposes. For more details, please view the Barchart Disclosure Policy here.
More news from Barchart
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
