Coffee Prices Drop Sharply Amid Increased Production Forecasts

July arabica coffee (KCN25) closed down -9.75 (-2.70%) on Wednesday, while July ICE robusta coffee (RMN25) fell -104 (-2.21%).

Coffee prices plunged on Wednesday, with arabica reaching a 7-week low and robusta hitting a 6.5-month low.

Production Forecasts Weighing on Prices

Over the past four weeks, coffee prices have faced downward pressure due to expectations of increased production. The USDA’s Foreign Agricultural Service (FAS) recently forecasted a 0.5% year-over-year increase in Brazil’s 2025/26 coffee production to 65 million bags. Additionally, Vietnam’s coffee output is projected to rise by 6.9% year-over-year to 31 million bags.

The rise in ICE coffee inventories is contributing to the price drop. As of last Friday, ICE-monitored robusta inventories increased to an 8-month high of 5,438 lots. Meanwhile, ICE-monitored arabica inventories rose to a 3.75-month high of 892,468 bags on Tuesday.

Concerns Over Demand and Weather

Demand concerns are further negatively impacting prices. Major importers like Starbucks and Hershey noted that a 10% tariff on imports could lead to increased prices and lower sales volumes.

Concerns about Brazilian weather could lend some support to coffee prices. Somar Meteorologia reported that the Minas Gerais region received only 0.3 mm of rain in the week ending May 24, just 4% of the historical average.

Exports and Production Impacts

Brazil’s smaller coffee exports provide a bullish signal for prices. Cecafe reported that Brazil’s April green coffee exports fell 28% year-over-year to 3.05 million bags, while total exports from January to April dropped 15.5% year-over-year to 13.186 million bags.

Robusta coffee is benefiting from decreased production in Vietnam due to drought, which caused a 20% drop to 1.472 million metric tons for the 2023/24 crop year, marking the smallest crop in four years. Vietnam’s coffee exports for 2024 fell 17.1% year-over-year to 1.35 million metric tons, with January-April exports in 2025 down 9.8% year-over-year to 663,000 metric tons.

Projected Trends and Future Estimates

The USDA’s biannual report released on December 18 showed a mixed forecast for coffee prices. It projected a 4.0% year-over-year increase in world coffee production for 2024/25 to 174.855 million bags, with arabica production up by 1.5% and robusta production increasing by 7.5%. However, the USDA also anticipates a 6.6% decrease in ending stocks to a 25-year low of 20.867 million bags.

For the 2025/26 marketing year, Volcafe revised down Brazil’s arabica production estimate to 34.4 million bags due to drought conditions. The firm projects a global 2025/26 arabica coffee deficit of 8.5 million bags, marking five consecutive years of deficits.

On the date of publication, Rich Asplund did not hold any positions in the securities mentioned. All information is provided for informational purposes. Please refer to the Barchart Disclosure Policy here.

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