Coffee Prices Dip as Supply Concerns Loom
March Arabica and Robusta Coffee Prices Experience Decline
On Tuesday, March arabica coffee (KCH25) closed down -15.60 (-3.64%), while March ICE robusta coffee (RMH25) fell -18 (-0.32%). Coffee prices initially increased before giving up those gains and declining due to long liquidation pressures, with arabica falling notably. The prices once hit a new all-time high for nearest futures. Concerns about coffee crops intensified following reports of below-average rainfall in Brazil, the world’s largest arabica coffee producer. According to Somar Meteorologia, Brazil’s top coffee-growing region, Minas Gerais, received only 53.9 mm of rain last week, which is just 85% of the normal amount.
Ongoing Supply Concerns Support Coffee Prices
Global fears about coffee supply have been dragging prices down lately. On January 28, Conab, Brazil’s government crop forecasting agency, projected a 4.4% decline in Brazil’s 2025/26 coffee crop to a three-year low of 51.81 million bags. Additionally, Conab revised its 2024 coffee crop estimate down by 1.1%, lowering it to 54.2 million from a previously reported 54.8 million bags.
Last year’s dry El Niño weather may have caused long-lasting damage to coffee crops in South and Central America. Rainfall in Brazil has consistently fallen below average since April, harming coffee trees during the critical flowering stage and reducing expectations for the 2025/26 arabica coffee crop. Brazil is experiencing its driest weather since 1981, according to Cemaden, a natural disaster monitoring center. Meanwhile, Colombia, the world’s second-largest arabica coffee producer, is recovering gradually from the drought caused by El Niño.
Robusta Coffee Prices Suffer from Reduced Production
Robusta coffee prices are feeling the effects of decreased production. In Vietnam, drought has led to a 20% drop in coffee production for the 2023/24 crop year, totaling 1.472 million metric tons (MMT) — the smallest yield in four years. The USDA Foreign Agricultural Service (FAS) projected that Vietnam’s robusta coffee production will see a slight decline in the new 2024/25 marketing year, dropping from 28 million to 27.9 million bags. Additionally, the Vietnam General Statistics Office reported that coffee exports in January 2024 decreased by 17.1% year-on-year to 1.35 MMT. However, the Vietnam Coffee and Cocoa Association recently raised its 2024/25 production estimate to 28 million bags, up from 27 million in October.
Inventory Levels Impacting Market Prices
Rising robusta coffee inventories are contributing to bearish sentiments in the market, as ICE-monitored robusta coffee inventories reached a four-month high of 4,603 lots on January 31. In comparison, arabica coffee inventories also rose to a 2.5-year high of 993,562 bags on January 6 but later dropped to a three-month low of 847,805 bags as of last Wednesday.
Global Coffee Exports Show Mixed Signals
Within the market, larger global coffee exports are contributing to downward pressure on prices. Last Tuesday, Conab revealed that Brazil’s 2024 coffee exports surged by 28.8% year-on-year, reaching a record 50.5 million bags. Furthermore, Vietnam’s January coffee exports increased by 6.3% month-on-month to 134,000 MT. Despite this, the ICO reported a 12.4% year-on-year decrease in global coffee exports in December, totaling 10.73 million bags. The overall exports from October to December also fell by 0.8% from the previous year, accumulating to 32.25 million bags.
Production and Consumption Trends: A Double-Edged Sword
In a somewhat negative turn, the International Coffee Organization (ICO) recently announced that global coffee production rose by 5.8% year-on-year in 2023/24, reaching a record 178 million bags. Simultaneously, global coffee consumption has also experienced a rise, increasing by 2.2% year-on-year to 177 million bags, resulting in a slight surplus of 1 million bags.
The USDA’s biannual report from December 18 reflected mixed signals for coffee prices. The USDA forecasted a global coffee production increase of 4.0% year-on-year for 2024/25, totaling 174.855 million bags, with arabica production up by 1.5% to 97.845 million and robusta production expected to rise by 7.5% to 77.01 million bags. However, the USDA also projected that 2024/25 ending stocks would decrease by 6.6% to a 25-year low of 20.867 million bags, down from 22.347 million bags in 2023/24. Separately, the USDA on November 22 forecasted Brazil’s 2024/25 coffee output to be 66.4 MMT, below its previous estimate of 69.9 MMT, with Brazil’s coffee inventories expected to decline by 26% year-on-year to 1.2 million bags at the end of the 2024/25 season in June.
For the 2025/26 marketing year, Volcafe reduced its Brazil arabica coffee production estimate on December 17 to 34.4 million bags, a drop of about 11 million bags from their earlier forecast following a crop tour that highlighted the impact of prolonged drought conditions in Brazil. Volcafe now expects a global arabica coffee deficit of 8.5 million bags for 2025/26, increasing from a 5.5 million bag deficit for 2024/25, marking five consecutive years 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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