Coffee Prices Surge Amid Supply Concerns and Weather Challenges

Coffee Market Experiences Record Highs and Sustained Support

March arabica coffee (KCH25) today is up +7.50 (+2.54%), and January ICE robusta coffee (RMF25) is up +187 (+3.91%).

Today, coffee prices continued their significant three-week rally, with March arabica reaching a contract high and December arabica achieving a new 13-year high for nearest futures. January robusta coffee also rose to a 1-1/2 month high.

A key factor behind rising coffee prices is the USDA’s Foreign Agricultural Service (FAS) revision of Brazil’s 2024/25 coffee production forecast, now projected at 66.4 million metric tons (MMT), down from a previous forecast of 69.9 MMT. Additionally, coffee inventories in Brazil are expected to fall to 1.2 million bags by the end of the 2024/25 season in June, reflecting a 26% year-over-year decrease.

Concerns over prolonged droughts in Brazil have further bolstered coffee prices. Since April, rainfall in Brazil has been consistently below average, harming coffee trees during the critical flowering stage, which reduces the 2025/26 arabica coffee crop’s potential. According to natural disaster monitoring center Cemaden, the country is experiencing its driest weather since 1981.

Tight supplies of robusta coffee are also driving prices higher. Vietnam’s General Department of Customs revealed last Monday that October coffee exports fell by 11.6% month-over-month to 45,412 metric tons, while exports from January to October dropped by 11.1% year-over-year to 1.15 MMT. Additionally, there are fears that heavy rains in Vietnam could flood coffee fields, delaying the harvest, as the country enters its coffee harvest season.

Reduced robusta production in Vietnam has been noted, with the agriculture department reporting a 20% drop in production for the 2023/24 crop year to 1.472 MMT—the smallest crop in four years, primarily due to drought. The USDA FAS projected that Vietnam’s robusta coffee production in the 2024/25 marketing year will slightly decline to 27.9 million bags from 28 million bags seen in the 2023/24 season.

Supporting coffee prices further, Brazil’s crop forecasting agency, Conab, decreased its 2024 production forecast on September 19 from 58.8 million bags to 54.8 million bags.

Recent rainfall in Brazil has offered some relief from drought conditions. Somar Meteorologia reported that Minas Gerais, Brazil’s largest arabica coffee-producing area, received 60.9 mm of rain last week, which is 127% of the historical average.

However, signs of larger global coffee supplies could put downward pressure on prices. The International Coffee Organization (ICO) reported on November 8 that global coffee exports in September rose by 25% year-over-year to 10.76 million bags, while exports from October to September increased by 11.7% year-over-year to reach 137.27 million bags.

Despite the quantities, tight coffee inventories still support prices. ICE-monitored arabica coffee inventories rebounded from a 24-year low of 224,066 bags in November 2023 to a 2-1/3 year high of 893,325 bags this past Thursday. In contrast, ICE-monitored robusta coffee inventories decreased to a 6-1/2 month low of 3,854 lots after peaking at a 1-3/4 year high of 6,521 lots in July, although they remain above a record low of 1,958 lots seen in February 2024.

Recent Brazilian coffee export updates cast a negative light on the market. Cecafe reported last Monday that Brazil’s October green coffee exports rose by 11% year-over-year to 4.57 million bags. Furthermore, Cecafe noted on July 11 that Brazil’s total coffee exports for the 2023/24 season climbed by 33% year-over-year to a record 47.3 million bags.

Furthering the bearish sentiment, the ICO projected that global coffee production for 2023/24 would increase by 5.8% year-over-year to a record 178 million bags due to an exceptional off-biennial crop year. The ICO also reported that global coffee consumption is expected to rise by 2.2% year-over-year to a record 177 million bags, leading to a projected 1 million bag surplus.

The USDA’s bi-annual report published on June 20 was also viewed as bearish for coffee prices. The FAS forecasts a 4.2% year-over-year increase in world coffee production for 2024/25, totaling 176.235 million bags. This includes a 4.4% increase in arabica production to 99.855 million bags and a 3.9% increase in robusta production to 76.38 million bags. The USDA, furthermore, anticipates that ending stocks for 2024/25 will rise by 7.7% to 25.78 million bags from 23.93 million bags in 2023/24.

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 here.

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