Coffee Prices Slide Amid Weather Changes and Supply Concerns
December arabica coffee (KCZ24) is down -1.75 (-0.70%) today, while November ICE robusta coffee (RMX24) has decreased -106 (-2.32%).
Weather Patterns Impacting Coffee Pricing
Today, coffee prices continued to drop, following a decline on Monday that saw robusta reach its lowest point in over two months. In Brazil, recent above-average rainfall has alleviated drought worries, contributing to a decrease in coffee value. Last week, arabica coffee fell to a 1-1/2 week low after Somar Meteorologia documented 36.8 mm of rain in Minas Gerais—representing 115% of the historical average. This region produces about 30% of Brazil’s arabica coffee. Furthermore, meteorologist Climatempo predicts more significant rainfall in Minas Gerais starting Friday, which is likely to moderate temperatures and enhance soil moisture.
Concerns About Future Yields Persist
While the recent rains are promising, concerns linger regarding Brazil’s dry conditions that may hinder coffee yields, suggesting potential price increases. Since April, rainfall has been below average, adversely affecting coffee trees during their critical flowering phase and lowering forecasts for the 2025/26 arabica coffee crop.
Inventory Levels and Market Dynamics
Despite the decline in prices, tight coffee supplies are mitigating losses. As of October 3, ICE-monitored arabica coffee inventories dropped to a 4-1/2 month low of 795,874 bags, while robusta inventories reached a 5-1/2 month low of 4,020 lots last Friday. Recently, arabica inventories had increased to a 1-1/2 year high, reflecting market fluctuations; they rose to 858,474 bags on September 12 from a 24-year low of 224,066 bags in November 2023. Similarly, robusta inventories climbed to a one-year high of 6,521 lots on July 25, recovering from a record low of 1,958 lots posted in February 2024.
Global Export Trends
A report released by the International Coffee Organization (ICO) on October 7 indicated an increase in global coffee exports, which rose +6.5% year-over-year in August to 10.92 million bags, and +9.9% year-over-year for the October-August period totaling 125.67 million bags. Additionally, Brazil’s green coffee exports for September, as reported by Cecafe on October 9, jumped +34% year-over-year to 4.1 million bags, which aligns with trends of rising global exports. On July 11, Cecafe also noted that Brazil’s overall coffee exports reached a record 47.3 million bags for the 2023/24 production year, an increase of +33% year-over-year.
Factors Affecting Robusta Prices
Robusta prices are also influenced by fears surrounding Vietnam’s coffee crops due to extreme dryness. The country’s agriculture department announced a -20% reduction in production for the 2023/24 crop year, marking the lowest output in four years. The USDA Foreign Agricultural Service (FAS) projects a slight decrease in robusta production for the 2024/25 season, dropping to 27.9 million bags from 28 million bags the previous year. Data from the General Department of Vietnam Customs revealed that September coffee exports fell -32.6% month-over-month to 51,369 MT, with a year-to-date decline of -11.7% year-over-year to 1.1 MMT.
Future Projections and Concerns
Supporting the outlook for coffee prices, Brazil’s crop forecasting agency, Conab, reduced its 2024 coffee production estimate from 58.8 million bags down to 54.8 million bags. Conversely, the ICO indicated in May that global coffee production for 2023/24 is expected to increase by +5.8% year-over-year to 178 million bags. They also noted a slight increase in global consumption by +2.2% year-over-year, leading to a 1 million bag surplus.
In its bi-annual report, the USDA forecasted that world coffee production for the 2024/25 season will rise by +4.2% year-over-year to 176.235 million bags. This includes a +4.4% increase in arabica production and a +3.9% growth in robusta production. As yields improve and more land is planted in Brazil, arabica coffee production is projected to reach 48.2 million bags, a +7.3% increase from the previous year. Colombia, the second-largest arabica producer, is also expected to see a slight rise of +1.6% to 12.4 million bags in 2024/25.
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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 here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
