Coffee Prices Decline Amid Supply Concerns and Weather Forecasts

May arabica coffee (KCK25) closed down -2.75 (-0.71%) on Friday, while May ICE robusta coffee (RMK25) dropped -74 (-1.36%). The downward trends in coffee prices continued from Thursday’s steep declines, influenced by forecasts predicting rain in Brazil. Somar Meteorologia indicated that Brazil would experience dry and hot weather for the remainder of the week, transitioning to several days of rain next week, which could alleviate some of the dry conditions.

Robusta Coffee Market Update

Robusta coffee is facing additional pressure. Vietnam’s General Statistics Office reported a 6.6% year-over-year increase in February coffee exports, totaling 169,000 metric tons. Furthermore, the forecast of rain in Vietnam, particularly in the Central Highlands—the largest coffee-growing region—could negatively impact robusta coffee prices. Vietnam currently stands as the world’s leading producer of robusta coffee beans.

Inventory Trends and Their Impact

Bearish trends in coffee prices are also tied to the rebound in coffee inventories. ICE-monitored robusta coffee stocks reached a one-month high of 4,356 lots on Friday. In contrast, arabica coffee inventories dropped to a nine-and-a-quarter month low of 758,514 bags on February 18 but have since rebounded to a two-week high of 809,128 bags as of last Thursday.

Last Monday, Somar Meteorologia reported that Minas Gerais, Brazil’s primary arabica coffee-producing region, received just 11.4 mm of rain during the week ending February 22, which is only 24% of the historical average. The report was delayed due to the Brazilian Carnival holiday. As the world’s largest arabica coffee producer, Brazil’s weather patterns significantly impact global coffee supply.

Sales and Supply Outlook

A bullish development for the market is that a larger proportion of Brazil’s coffee harvest has already been sold compared to previous years. As of February 11, Safras & Mercado indicated that producers sold 88% of Brazil’s 2024/25 coffee harvest—an improvement from last year’s 79% and the five-year average of 82%. However, sales of the 2025/26 crop have been slower at only 13%, compared to the four-year average of 22%, indicating a potential supply squeeze.

Ongoing supply fears have contributed to heightened coffee prices. Cecafe reported that Brazil’s green coffee exports fell by 1.6% year-over-year in January, totaling 3.98 million bags. Additionally, on January 28, Conab, Brazil’s government crop forecasting agency, projected a 4.4% reduction in Brazil’s 2025/26 coffee crop to a three-year low of 51.81 million bags. Conab also adjusted its 2024 Brazil coffee crop estimate down by 1.1%, from 54.8 million bags to 54.2 million bags.

Long-Term Weather Effects

The long-term impact of last year’s dry El Niño weather may inflict lasting damage on coffee crops in South and Central America. Since April of the previous year, rainfall in Brazil has consistently fallen below average, adversely affecting coffee trees during their flowering stage, thus diminishing prospects for Brazil’s 2025/26 arabica coffee output. According to Cemaden, Brazil is experiencing its driest weather since 1981. Meanwhile, Colombia, the second-largest arabica producer, is gradually recovering from last year’s drought, which was intensified by El Niño conditions.

Robusta Price Dynamics

Robusta coffee prices are supported by reduced production. In the 2023/24 crop year, drought conditions have led to a 20% decline in Vietnam’s coffee production, totaling 1.472 million metric tons—the smallest crop in four years. The USDA’s Foreign Agricultural Service projected a slight decrease in Vietnam’s robusta coffee production for the upcoming 2024/25 marketing year, estimating 27.9 million bags, down from 28 million bags in the 2023/24 season. Additionally, the General Statistics Office of Vietnam reported a 17.1% year-over-year drop in 2024 coffee exports, totaling 1.35 million metric tons. However, the Vietnam Coffee and Cocoa Association has slightly increased its production forecast for 2024/25 to 28 million bags.

Global Export Trends

Recent reports regarding global coffee exports have created a bearish sentiment. According to Conab, Brazil’s 2024 coffee exports increased by 28.8% year-over-year, reaching a record 50.5 million bags. In contrast, the International Coffee Organization reported that global coffee exports fell 12.4% year-over-year in December, totaling 10.73 million bags. Furthermore, total global coffee exports for October to December saw a slight decline of 0.8% year-over-year, accounting for 32.25 million bags.

USDA Reports and Future Projections

The USDA’s biannual report issued on December 18 provided mixed signals for coffee prices. The USDA’s FAS projected a 4.0% increase in world coffee production for 2024/25, reaching 174.855 million bags, with arabica production anticipated to rise by 1.5% to 97.845 million bags and robusta production expected to increase by 7.5% to 77.01 million bags. However, ending stocks are expected to decline by 6.6%, hitting a 25-year low of 20.867 million bags, which contrasts with 22.347 million bags reported for the 2023/24 season.

Looking ahead to the 2025/26 marketing year, Volcafe on December 17 revised its estimates, forecasting Brazil’s arabica coffee production at 34.4 million bags—down approximately 11 million bags from a prior September estimate. Volcafe has predicted a global arabica coffee deficit of 8.5 million bags for the 2025/26 season, compared to a 5.5 million bag deficit for 2024/25, marking the fifth consecutive year of deficits.

On the date of publication, Rich Asplund did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data herein are for informational purposes only. For more information, please view the Barchart Disclosure Policy here.

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