Coffee Prices Dip Amid Changing Weather Patterns and Export Trends
December arabica coffee (KCZ24) closed down -5.35 (-2.04%), while November ICE robusta coffee (RMX24) fell -60 (-1.21%) on Tuesday.
Brazilian Rainfall Forecasts Weigh on Prices
On Tuesday, coffee prices declined after earlier gains due to expectations of rain in Brazil. Arabica coffee dropped from a 1-1/2 week high, while robusta fell from a 1-week high. Meteorologist Climatempo indicated that Brazil’s primary coffee-growing regions would receive substantial rainfall starting this weekend, contributing to the price drop. Additionally, a decrease in the Brazilian real (^USDBRL) to a 1-month low against the dollar spurred export selling by coffee producers.
Dry Conditions Could Impact Future Yields
The ongoing drought in Brazil remains a concern for coffee yields. Rainfall has been below average since April, affecting coffee trees during a critical flowering period and threatening Brazil’s 2025/26 arabica coffee crop. Somar Meteorologia reported that the Minas Gerais region, which produces about 30% of Brazil’s arabica, received 33.4 mm of rain last week—99% of the historical average.
Inventory Levels Affect Price Movements
Low coffee inventories are helping to stabilize prices amid growing concerns. As of October 3, ICE-monitored arabica coffee stocks hit a 4-1/4 month low of 795,874 bags. Similarly, robusta inventories reached a 4-3/4 month low of 4,179 lots on Tuesday. Despite these declines, the total coffee stock levels have fluctuated significantly over the past year, with arabica reaching a 1-1/2 year high of 858,474 bags on September 12, following a low of 224,066 bags in November 2023.
Rising Global Coffee Exports Present Challenges
Adding to the pressures on prices, the International Coffee Organization (ICO) reported a 6.5% year-over-year increase in global coffee exports in August, totaling 10.92 million bags. Overall, exports from October to August rose by 9.9% compared to the previous year, reaching 125.67 million bags. Furthermore, Cecafe disclosed that Brazil’s green coffee exports surged by 34% year-over-year in September, amounting to 4.1 million bags, with a record total of 47.3 million bags exported during the 2023/24 season.
Market Dynamics Amid Changing Weather Patterns
On September 26, arabica prices reached a 13-year nearest-futures high, while robusta also achieved a contract high amid concerns about weather effects on coffee production in major producing countries like Brazil, which has been enduring the driest conditions since 1981.
Vietnam’s Drought Raises Concerns for Robust Production
For robusta coffee, fears of continued drought in Vietnam are raising alarms about potential yield reductions. Vietnam’s agriculture department reported a 20% decline in coffee production for the 2023/24 crop year, dropping to 1.472 million metric tons, the lowest in four years. The USDA FAS further suggested that robusta production may dip slightly in the upcoming marketing year, estimating 27.9 million bags for 2024/25.
Forecasts Suggest Potential Production Increases
In a recent report, Conab lowered its coffee production forecast for Brazil in 2024 to 54.8 million bags, down from an earlier projection of 58.8 million bags. Conversely, the ICO noted a 5.8% year-over-year increase in global coffee production for the 2023/24 season, reaching 178 million bags. This trend, alongside a 2.2% rise in global coffee consumption, has created a 1 million bag surplus.
Future Projections Look Mixed for Coffee
The USDA’s bi-annual report in June projected a 4.2% increase in world coffee production for 2024/25, with arabica production expected to rise by 4.4% to 99.855 million bags and robusta by 3.9% to 76.38 million bags. They also anticipated a 7.7% rise in ending stocks, totaling 25.78 million bags, suggesting a future oversupply of coffee.
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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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
