July Coffee Prices Hit Seven-Week and Six-Month Lows

July arabica coffee (KCN25) declined by -8.70 (-2.41%), while July ICE robusta coffee (RMN25) fell by -118 (-2.51%).

Coffee prices experienced significant drops today, with arabica reaching a 7-week low and robusta declining to a 6.5-month low.

Production and Supply Outlook

Recent coffee price pressures stem from expectations of higher production and sufficient supplies. The USDA’s Foreign Agricultural Service (FAS) recently projected Brazil’s coffee production for 2025/26 to rise by 0.5% y/y to 65 million bags. Additionally, Vietnam’s production is expected to climb 6.9% y/y to 31 million bags.

ICE coffee inventories are contributing to lower prices. Robust inventory levels reached an 8-month high of 5,438 lots for robusta coffee, while arabica inventories reached a 3.75-month high of 892,468 bags.

Regional Insights

On May 9, the USDA estimated that Honduras’ coffee production, the largest in Central America, will increase by 5.1% y/y to 5.8 million bags. Furthermore, consulting firm Safras & Mercado raised Brazil’s 2025/26 estimate to 65.51 million bags from 62.45 million bags. Conab also increased Brazil’s coffee production forecast to 55.7 million bags from 51.81 million bags made in January.

Demand Challenges

Concerns over demand are weighing on coffee prices. Major importers, including Starbucks, Hershey, and Mondelez International, have indicated that a baseline 10% tariff on U.S. imports could lead to higher prices and reduced sales volumes.

Weather Impact

Concerns about poor weather in Brazil support coffee prices. Somar Meteorologia reported that Minas Gerais, Brazil’s largest arabica growing area, received only 0.3 mm of rain during the week ending May 24, representing just 4% of the typical average.

Export Trends

Brazil’s smaller coffee exports also contribute to prices. Cecafe reported a 28% drop y/y in April green coffee exports to 3.05 million bags. For the January-April period, exports fell 15.5% y/y to 13.186 million bags.

Production Declines in Vietnam

Reduced robusta production in Vietnam provides additional support for market prices. The nation’s coffee output for the 2023/24 crop year fell by 20% to 1.472 million metric tons, the lowest in four years. Vietnam also reported a 17.1% drop y/y in 2024 coffee exports to 1.35 million metric tons.

Future Projections

The USDA’s biannual report released on December 18 presented a mixed outlook for coffee prices. The FAS anticipates a 4.0% y/y increase in global coffee production to 174.855 million bags for 2024/25, including a 1.5% increase in arabica to 97.845 million bags and a 7.5% increase in robusta to 77.01 million bags. Ending stocks for 2024/25 are projected to decrease by 6.6% to a 25-year low of 20.867 million bags.

For the 2025/26 marketing year, Volcafe revised its Brazil arabica production estimate down to 34.4 million bags, an 11 million bags decrease from earlier estimates due to ongoing drought conditions. They also predict a 2025/26 arabica deficit of 8.5 million bags, widening from a 5.5 million bag deficit in 2024/25, marking the fifth consecutive year of deficits.

On the date of publication, Rich Asplund did not have any positions in the securities mentioned in this article. All information in this article is for informational purposes only. For more details, please view the Barchart Disclosure Policy
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