Coffee Prices Rise Amid Volatility in Brazil’s Production and Global Supply
March arabica coffee (KCH25) Thursday closed up +2.05 (+0.65%), and March ICE robusta coffee (RMH25) closed up +23 (+0.46%).
Market Reactions to Currency Movements
Coffee prices moved higher on Thursday, spurred by a rally in the Brazilian real (^USDBRL), which reached a two-and-a-half-week high. This increase ignited short covering in coffee futures.
Inventory Increases Temper Price Gains
Rising inventories are putting a cap on coffee prices. ICE-monitored arabica coffee stocks recently surged to a two-and-a-half-year high of 993,562 bags. Similarly, ICE-monitored robusta coffee inventories rose to a three-month high of 4,415 lots on Wednesday.
Weather Challenges and Coffee Output
Arabica coffee prices find some support amid continued drought conditions in Brazil. Somar Meteorologia reported that Minas Gerais, Brazil’s largest arabica-producing area, received only 62.5 mm of rain last week—about 86% of the historical average. In contrast, robusta coffee is being supported by signs of shrinking global supplies. Vietnam’s General Statistics Office announced on Sunday that coffee exports for 2024 are projected to drop by 17.2% compared to last year, totaling just 1.343 million metric tons. Vietnam stands as the world’s leading robusta coffee producer.
Recent Price Rally Driven by Production Outlook
Last month witnessed a significant price rally as concerns grew over a smaller Brazilian coffee crop. March arabica futures reached contract highs, while the December nearest futures contract (Z24) hit a record high. This uptick stemmed from Volcafe’s December 17 report that cut its 2025/26 production estimate for Brazilian arabica coffee to 34.4 million bags—an 11 million bag reduction from previous forecasts due to indications of prolonged drought. They also predict a global arabica coffee deficit of 8.5 million bags for 2025/26, widening from a 5.5 million bag deficit for 2024/25, marking the fifth consecutive year of deficits.
USDA Report Presents Mixed Outlook
The USDA’s biannual report on December 18 offered a mixed picture for coffee prices. The Foreign Agriculture Service (FAS) projected a 4% increase in world coffee production for 2024/25, reaching 174.855 million bags. Arabica production is expected to rise by 1.5% to 97.845 million bags, while robusta production is set to grow by 7.5% to 77.01 million bags. However, the FAS also forecast a decline in ending stocks, which are expected to fall by 6.6% to a 24-year low of 20.867 million bags.
Long-term Challenges Due to Weather Patterns
The impact of El Nino’s dry conditions last year may result in long-term damage to coffee crops in South and Central America. Since last April, rainfall in Brazil has consistently remained below average, harming coffee trees during critical flowering periods. This has diminished expectations for the 2025/26 arabica crop. Data from Cemaden indicate that Brazil is experiencing its driest weather since 1981. Additionally, Colombia, the second-largest arabica producer, is gradually recovering from last year’s drought.
Robusta Market Faces Production Cuts
Robusta coffee prices are supported by reduced production levels. Vietnam’s coffee output for the 2023/24 crop year fell by 20% to 1.472 million metric tons, marking the smallest harvest in four years. Projections from the USDA FAS suggest that robusta production may slightly decline to 27.9 million bags in the 2024/25 marketing year.
Global Export Figures Add Pressure on Prices
Reports of increased global coffee exports have introduced bearish sentiments into the market. The International Coffee Organization (ICO) indicated that global coffee exports for October rose by 15.1% year-over-year to 11.13 million bags. For the entire 2023/24 period, exports increased by 11.7% year-over-year to a total of 137.27 million bags. Brazilian export news was also unfavorable, with Cecafe stating on December 23 that Brazil’s green coffee exports rose by 2.7% year-over-year to 4.29 million bags, while Brazil’s 2023/24 exports surged by 33% to a record 47.3 million bags.
Production Surplus for 2023/24
The ICO recently highlighted that global coffee production for 2023/24 increased by 5.8% to a record 178 million bags, attributed to an exceptional off-biennial crop year. Meanwhile, global coffee consumption also rose, climbing 2.2% to a record 177 million bags. This has resulted in a surplus of 1 million bags in the coffee market.
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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
