Coffee Prices Show Mixed Results as Weather Patterns Affect Supply Outlook

March arabica coffee (KCH25) Monday closed up +2.10 (+0.65%), while March ICE robusta coffee (RMH25) closed down -64 (-1.29%).

Arabica Rises Amidst Supply Concerns

Coffee prices settled in mixed territory on Monday. Arabica coffee surged to a three-week high, driven by dry conditions in Brazil. Reports from Somar Meteorologia noted that Brazil’s largest arabica-growing region, Minas Gerais, received only 29.6 mm of rain last week, just 31% of its historical average. Conversely, robusta coffee saw a decline, hitting a one-week low. The drop was influenced by a recent report from Vietnam’s General Department of Customs, revealing that coffee exports from Vietnam doubled, surging +102.6% year-over-year to 127,655 MT in December.

Inventory Increases Add Pressure

Higher coffee inventories contribute to negative price forecasts. ICE-monitored arabica coffee inventories reached a two-and-a-half-year high last Monday, totaling 993,562 bags. Additionally, robusta coffee stocks increased, hitting a three-month high of 4,415 lots.

Grounds for Higher Prices

Last month, coffee prices experienced a notable rally due to predictions of a reduced Brazilian coffee crop. March arabica futures hit a new contract high, while the December futures contract (Z24) marked a record high as well. The forecast for a diminished crop came after Volcafe, on December 17, reduced its estimate for Brazil’s 2025/26 arabica production to 34.4 million bags, approximately 11 million bags lower than a prior estimate, prompted by severe drought conditions reported during a crop tour.

Brazil’s Weather Crisis

Brazil’s ongoing drought, the worst since 1981, has severely affected coffee production. Average rainfall has been significantly below normal since April, which damaged coffee trees during critical flowering stages. This threatens the potential yield for Brazil’s 2025/26 arabica coffee crop. Meanwhile, Colombia, the second-largest producer of arabica coffee, is slowly recovering from a drought caused by El Nino last year.

Challenges for Robusta Coffee

Robusta coffee prices remain stable due to a decrease in production. In Vietnam, robusta production for the 2023/24 crop year dropped by 20% to 1.472 million metric tons, marking the smallest output in four years. The USDA Foreign Agricultural Service projected a slight dip in Vietnam’s robusta production for the 2024/25 marketing year, from 28 million bags to 27.9 million bags. In contrast, Vietnam Coffee and Cocoa Association raised its 2024/25 production estimate to 28 million bags, up from 27 million bags previously.

Global Export Figures Weigh on Prices

On the contrary, increased global coffee exports have a bearish effect on prices. The International Coffee Organization reported a +15.1% year-on-year rise in global coffee exports in October to 11.13 million bags for the beginning of the 2024/25 season. Over the 2023/24 period, total exports also rose +11.7% year-over-year to 137.27 million bags. Recent data from Cecafe revealed that Brazil’s green coffee exports increased +2.7% year-over-year to 4.29 million bags, while their overall exports reached a record 47.3 million bags, up 33% from the previous year.

Mixed Projections Ahead

The International Coffee Organization has shared mixed signals regarding future output. It reported that global coffee production for the 2023/24 season jumped +5.8% year-on-year to a record 178 million bags, attributing it to a favorable off-biennial crop year. Meanwhile, coffee consumption also climbed to a record of 177 million bags, resulting in a slight surplus of 1 million bags.

USDA Reports Present Diverse Forecasts

The USDA’s biannual report, released on December 18, painted a varied outlook for coffee prices. It anticipated a +4.0% rise in world coffee production for 2024/25, projecting it to reach 174.855 million bags. This includes a +1.5% increase in arabica production to 97.845 million bags and a +7.5% increase for robusta to 77.01 million bags. The report also indicated that ending stocks for 2024/25 could drop -6.6% to a 24-year low of 20.867 million bags, down from 22.347 million bags in 2023/24.

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.