Coffee Prices Drop as Rain Forecasts Impact Futures Markets

May arabica coffee (KCK25) ended Thursday down -22.80 (-5.56%), while May ICE robusta coffee (RMK25) closed lower by -216 (-3.83%).

Price Declines Driven by Weather Forecasts

Coffee prices fell significantly on Thursday due to forecasts predicting rain in Brazil, which prompted long liquidation in coffee futures. Somar Meteorologia announced that Brazil would transition from dry and hot weather to several rainy days next week, alleviating current dryness.

Robusta Coffee Faces Additional Pressure

Robusta coffee prices also faced downward pressure on Thursday. The General Statistics Office of Vietnam reported a year-on-year increase of +6.6% in coffee exports for February, totaling 169,000 metric tons. Additionally, forecasts predict daily rain over the coming week in Vietnam’s Central Highlands, the country’s main coffee cultivation region, further influencing the market.

Brazil’s Coffee Harvest Insights

Somar Meteorologia indicated that the Minas Gerais region, Brazil’s largest arabica coffee area, received only 11.4 mm of rain for the week ending February 22, just 24% of the historical average. A report detailing this precipitation was delayed due to Brazil’s Carnival holiday. As the leading arabica coffee producer, Brazil’s weather patterns heavily impact global coffee supplies.

Inventory Dynamics and Pricing Support

Declining inventories are giving support to coffee prices. Last Friday, ICE-monitored robusta coffee inventories fell to a two-month low of 4,247 lots. In contrast, ICE-monitored arabica coffee inventories decreased to a 9-1/4 month low of 758,514 bags on February 18 but have since rebounded to 809,128 bags as of last Thursday.

Furthermore, a greater percentage of Brazil’s coffee harvest has been sold compared to previous years. As of February 11, Safras & Mercado reported that producers had sold 88% of the 2024/25 coffee harvest, surpassing last year’s 79% and the five-year average of 82%. However, sales for the 2025/26 crop trail the four-year average, with only 13% sold so far.

Supply Concerns Affecting Market Sentiment

Concerns about supply continue to influence coffee prices. Cecafe reported a decline in Brazil’s green coffee exports in January, which fell -1.6% year-on-year to 3.98 million bags. Additionally, on January 28, Brazil’s government crop forecasting agency, Conab, predicted a -4.4% decline in the 2025/26 coffee crop, projecting it at a three-year low of 51.81 million bags.

Moreover, Conab revised its 2024 coffee crop estimate down -1.1% to 54.2 million bags from an earlier estimate of 54.8 million bags, reflecting ongoing concerns over the impact of dry El Niño conditions from last year. Such conditions have led to below-average rainfall in Brazil since April, harming coffee trees during critical growth stages.

Robusta Coffee Production Declines

Robusta prices are also influenced by reduced production. In Vietnam, coffee production for the 2023/24 crop year has dropped -20% to 1.472 million metric tons, marking the lowest output in four years. The USDA FAS anticipates a slight dip in Vietnam’s robusta production for the 2024/25 marketing year to 27.9 million bags.

Reports indicate that Vietnam’s coffee exports in 2024 fell -17.1% year-on-year to 1.35 million metric tons, although projections show slight recovery in production estimates.

Counteracting Global Export Trends

Recent news regarding increased global coffee exports has implications for market pricing. Conab reported that Brazil’s 2024 coffee exports soared by +28.8% year-on-year to a record 50.5 million bags. However, the ICO noted that global coffee exports in December fell -12.4% year-on-year to 10.73 million bags, with the October to December period seeing a -0.8% decline year on year to 32.25 million bags.

Future Projections and Risks

The USDA’s biannual report issued on December 18 provided mixed signals for coffee prices. The Foreign Agriculture Service (FAS) projects world coffee production for 2024/25 to increase by +4.0% year-on-year, estimating production at 174.855 million bags, including a +1.5% rise in arabica production and a +7.5% increase in robusta production. Despite this, ending stocks are expected to decrease by -6.6% to a 25-year low of 20.867 million bags.

For the 2025/26 marketing year, Volcafe on December 17 reduced its Brazil arabica coffee production estimate to 34.4 million bags, roughly an 11 million bag decrease from previous reports. They predict a global deficit of -8.5 million bags for arabica coffee in 2025/26, marking the fifth consecutive year of deficits.

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

 

More news from Barchart

The views and opinions expressed are those of the author and do not necessarily represent those of Nasdaq, Inc.