Coffee Prices Surge Amid Supply Concerns and Weather Challenges

On Wednesday, May arabica coffee (KCK25) closed higher, rising by +6.65 (+1.80%), while May ICE robusta coffee (RMK25) increased by +15 (+0.28%).

Price Rally Continued Amid Supply Fears

Coffee prices extended their rally this week. Arabica coffee reached a 1.5-week high, and robusta coffee saw a 2.5-week high due to concerns over below-normal rainfall in Brazil affecting coffee yields. According to Somar Meteorologia, Brazil’s key arabica growing region of Minas Gerais received only 17.9 mm of rain during the week ending April 12, which is just 89% of the historical average. Additionally, robusta coffee prices are rising as ICE-monitored robusta inventories dropped to a 3.5-month low of 4,227 lots.

Factors Influencing Coffee Supply

Supply concerns are supporting coffee prices. Cecafe reported a 26% year-over-year decline in Brazil’s green coffee exports for March, totaling 2.95 million bags. Conab, Brazil’s government crop forecasting agency, previously projected a 4.4% decrease in the 2025/26 coffee crop, estimating it at a three-year low of 51.81 million bags. The agency also revised its 2024 Brazil coffee crop estimate down by 1.1%, from 54.8 million to 54.2 million bags.

Moreover, Cooxupe, Brazil’s largest arabica coffee co-operative, indicated that high temperatures and below-average rainfall last month will negatively impact this year’s coffee yields. As the world’s largest arabica coffee producer, Brazil’s crop health is critically significant.

Market Response to Global Events

The coffee market recently faced setbacks, as arabica coffee prices fell to a three-month low last week amid global trade war concerns affecting many commodities. Higher tariffs are also raising apprehensions about potential coffee demand decreases, as increased prices burden U.S. consumers.

Although arabica inventories have grown, which is typically a bearish indicator, the recent ICE data showed inventories rose to a four-week high of 790,337 bags, contributing to mixed market signals.

Potential Oversupply and Global Production Outlook

Marex Solutions noted that a broader global coffee surplus might emerge, predicting a jump to 1.2 million bags for the 2025/26 season from a previous 200,000 bags in 2024/25. The outlook for increased global supplies is particularly negative for robusta coffee. Their forecasts indicate Vietnam’s 2025/26 robusta production could reach 28.8 million bags—an increase of 7.9% year-over-year—and Brazil’s production may hit 25 million bags, up 13.6% year-over-year.

Additionally, the ongoing effects of drought, attributed to last year’s dry El Nino weather, may cause long-term damage to coffee crops in South and Central America. Rainfall has been below average in Brazil since last April, affecting coffee trees during crucial growth stages.

Vietnam’s Production Challenges

Robusta coffee production has also been affected by drought conditions in Vietnam, leading to a 20% production drop in the 2023/24 crop year, totaling 1.472 million metric tons—the smallest crop in four years. Furthermore, Vietnam’s General Statistics Office reported a 17.1% year-over-year decrease in 2024 coffee exports, totaling 1.35 million metric tons. Recent estimates from the Vietnam Coffee and Cocoa Association further decreased the 2024/25 coffee production estimate to 26.5 million bags, down from 28 million bags.

Export Trends and Market Dynamics

While Brazil’s coffee export figures rose by 28.8% year-over-year to a record 50.5 million bags, the International Coffee Organization reported a decline in global coffee exports for December of 12.4%, totaling 10.73 million bags, and a slight dip of 0.8% in overall exports from October to December.

USDA Analysis and Future Projections

The USDA’s December biannual report conveyed mixed signals for coffee prices. The Foreign Agriculture Service (FAS) forecasts a 4% increase in global coffee production for 2024/25, with arabica production rising by 1.5% and robusta by 7.5%. However, the FAS also anticipates that 2024/25 ending stocks will decrease by 6.6% to a 25-year low at 20.867 million bags.

For the 2025/26 marketing year, Volcafe reduced its Brazil arabica coffee production estimate to 34.4 million bags, down about 11 million bags based on findings from a recent crop tour that revealed extensive drought impacts. Additionally, Volcafe predicts a global deficit of 8.5 million bags in 2025/26, broader than the 5.5 million bag deficit anticipated for 2024/25.

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.