Coffee Market Update: Prices Mixed Amid Supply Concerns and Export Records
Robusta Coffee at 6-Week High, while Arabica Takes a Dip
March arabica coffee (KCH25) closed down -0.55 (-0.17%) on Tuesday, while March ICE robusta coffee (RMH25) closed up +120 (+2.33%).
Mixed Signals in Coffee Prices
Coffee prices settled mixed on Tuesday, with robusta rising to a six-week high. The increase in robusta prices stems from concerns about shrinking supplies from Vietnam, the leading robusta producer, as the country approaches its Lunar New Year holiday, which often disrupts bean supply.
Arabica Coffee Sees a Decline
Arabica coffee prices fell from a one-month high, closing slightly lower amid expectations of sufficient coffee supplies. A report from Cecafe last Wednesday revealed that Brazil’s 2024 arabica coffee exports surged +20% year-on-year to a record 37 million bags, while robusta exports nearly doubled, rising +98% year-on-year to 9.4 million bags.
Increased Inventories Weigh on Prices
Rising inventories are contributing to the bearish outlook for coffee prices. On January 6, ICE-monitored arabica coffee inventories reached a 2.5-year high of 993,562 bags, and robusta inventories climbed to a 3.5-month high of 4,506 lots on Tuesday.
Possible Crop Shortages Ahead
However, there are bullish factors in play. Brazil’s government crop forecasting agency, Conab, lowered its 2024 coffee crop estimate by -1.1% to 54.2 million bags, down from a September estimate of 54.8 million bags. Concerns about below-normal rainfall in major growing regions further support prices. Somar Meteorologia reported that Minas Gerais, Brazil’s largest arabica-growing area, received only 29.6 mm of rain last week, just 53% of the historical average.
Recent Price Movements
Coffee prices experienced a significant rally last month due to worries about a smaller Brazilian coffee crop. March arabica coffee reached a contract high, while the nearest-december futures contract (Z24) hit a record high. These price increases followed Volcafe’s December 17 revision of its 2025/26 Brazilian arabica coffee production estimate, reducing it to 34.4 million bags, about 11 million bags lower than the previous estimate due to an extended drought. Volcafe also predicts a global arabica coffee deficit of 8.5 million bags for 2025/26, marking the fifth consecutive year of shortages.
Consulting Firms Trim Expectations
Further supporting the bullish sentiment, consultancy Safras & Mercado projected the 2025/26 Brazilian coffee crop to be 62.45 million bags, a -5% decline year-on-year. Safras forecasts arabica output to fall -15% year-on-year to 38.35 million bags due to drought conditions, while robusta production is anticipated to be 24.1 million bags.
Long-term Weather Effects
The dry El Niño conditions have raised concerns about the potential for long-term damage to coffee crops in South and Central America. Since April, rainfall in Brazil has remained below average, affecting coffee tree health during crucial flowering periods and threatening the viability of the upcoming 2025/26 arabica crop. Brazil’s weather is reportedly the driest since 1981, according to the natural disaster monitoring agency Cemaden. Meanwhile, Colombia, the second-largest arabica producer, continues to recover from last year’s drought exacerbated by El Niño.
Robusta Production Challenges
Robusta coffee prices are bolstered by reduced production levels. Vietnam’s coffee output in the 2023/24 crop year fell -20% to 1.472 million metric tons, marking the smallest yield in four years. The USDA FAS projects a slight dip in Vietnam’s robusta production for the 2024/25 marketing year to 27.9 million bags, down from 28 million bags in 2023/24. Despite this, the Vietnam Coffee and Cocoa Association updated its 2024/25 production estimate to 28 million bags, an increase from the earlier estimate of 27 million bags.
Global Coffee Export Trends
However, rising global coffee exports have a bearish impact on prices. The International Coffee Organization (ICO) reported that global coffee exports for October, marking the start of the 2024/25 season, increased by +15.1% year-on-year to 11.13 million bags. Total global coffee exports for the 2023/24 season rose +11.7% year-on-year to 137.27 million bags. Additionally, Brazilian coffee export data revealed a +30.2% year-on-year increase, reaching a record 46.3 million bags.
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 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.
