Coffee Prices Take a Hit Amid Brazilian Real Weakness

Arabica and robusta coffee futures fall as Brazil’s currency declines, but tight inventories offer some support.

On Friday, December arabica coffee (KCZ24) closed down -2.70 (-1.06%), while November ICE robusta coffee (RMX24) closed down -88 (-1.79%). Prices slipped due to the Brazilian real (^USDBRL) reaching a one-month low, prompting Brazilian coffee producers to increase export sales.

Despite these declines, limited coffee supplies are preventing even greater losses. Last Thursday, ICE-monitored arabica coffee inventories dropped to a four-month low of 795,874 bags. Likewise, robusta coffee inventories fell to a four-and-three-quarter-month low of 4,191 lots by Friday. This follows a recovery where arabica inventories had risen to a year-and-a-half high of 858,474 bags on September 12, significantly up from a 24-year low of 224,066 bags in November 2023. Similarly, robusta coffee inventories had peaked at a one-year high of 6,521 lots on July 25, bouncing back from a record low of 1,958 lots just a few months earlier.

Adding pressure on coffee prices, a recent report from the International Coffee Organization (ICO) revealed global coffee exports increased by 6.5% year-over-year in August, reaching 10.92 million bags. The report also noted that total exports for the period from October to August rose by 9.9% year-over-year to 125.67 million bags.

In more news, Cecafe reported that Brazil’s green coffee exports for September surged by 34% year-over-year, totaling 4.1 million bags. This increase aligns with other reports showing higher export levels. Cecafe also noted on July 11 that Brazil’s total coffee exports for the 2023/24 crop year reached a record 47.3 million bags, marking a 33% year-over-year rise.

On September 26, December arabica coffee hit a 13-year nearest-futures high, while November robusta reached a contract high, due to concerns over weather conditions threatening global coffee production. Brazil is experiencing its driest weather since 1981, with rainfall significantly below average since April, endangering coffee trees during the crucial flowering stage and impacting expectations for the 2025/26 arabica crop. Cemaden, the national disaster monitoring center, reported that Brazil’s Minas Gerais region received only 0.9 mm of rain last week, which is just 2% of its historical average. Minas Gerais produces roughly 30% of Brazil’s arabica coffee.

Robusta prices are influenced by concerns about extreme dryness in Vietnam, which is impacting coffee crops and could reduce global robusta production. Vietnam’s agriculture department stated that coffee production for the 2023/24 season declined by 20% to 1.472 million metric tons, marking the smallest output in four years due to drought conditions. The USDA Foreign Agricultural Service (FAS) forecasted a slight drop in Vietnam’s robusta coffee production for the upcoming marketing year, projecting it at 27.9 million bags compared to 28 million bags in 2023/24. Meanwhile, the General Department of Vietnam Customs reported a 32.6% month-over-month decrease in Vietnam’s September coffee exports, totaling 51,369 metric tons, with a year-to-date drop of 11.7% to 1.1 million metric tons.

On a positive note, Brazil’s crop forecasting agency, Conab, revised down its 2024 coffee production forecast on September 19 to 54.8 million bags, down from an earlier estimate of 58.8 million bags made in May.

Conversely, the ICO reported on May 3 that global coffee production for 2023/24 is expected to rise by 5.8% year-over-year, reaching 178 million bags, largely due to an extraordinary off-biennial crop year. ICO also projected a 2.2% increase in global coffee consumption for the same period, resulting in a surplus of 1 million bags.

Furthermore, the USDA’s bi-annual report issued on June 20 carried bearish implications for coffee prices, projecting a 4.2% rise in global coffee production for the 2024/25 season to 176.235 million bags. This forecast includes a 4.4% increase in arabica production, expected to reach 99.855 million bags, as well as a 3.9% growth in robusta production, anticipated at 76.38 million bags. The report also estimates that ending stocks for 2024/25 will grow by 7.7% to 25.78 million bags compared to 23.93 million in 2023/24. Additionally, the USDA projected a 7.3% increase in Brazil’s arabica production to 48.2 million bags, thanks to higher yields and expanded planting areas. Colombia, the world’s second-largest arabica producer, is also set to see a 1.6% rise in production to 12.4 million bags for 2024/25.

More Coffee News from Barchart

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 those of the author and do not necessarily reflect those of Nasdaq, Inc.