Mixed Coffee Prices Amid Global Production Forecasts and Demand Concerns

On Friday, July arabica coffee (KCN25) closed up +0.40 (+0.10%), while July ICE robusta coffee (RMN25) closed down -39 (-0.74%). Coffee prices reflected a mixed settlement due to a weaker U.S. dollar, which supported prices. However, these gains were limited by increased global coffee supply forecasts. The USDA projects Honduras, Central America’s largest coffee producer, will increase its 2025/26 production by +5.1% year-on-year to 5.8 million bags. Additionally, the consulting firm Safras & Mercado raised Brazil’s 2025/26 production estimate to 65.51 million bags, up from 62.45 million bags.

Improved Inventory Levels Affect Price Sentiment

Recent improvements in coffee inventory levels are contributing to bearish sentiment. ICE-monitored robusta inventories climbed to a three-month high of 4,418 lots on Friday. Similarly, ICE-monitored arabica inventories reached a 2-3/4 month high of 844,473 bags on Wednesday.

On Tuesday, coffee prices faced downward pressure after Brazil’s crop forecasting agency, Conab, increased its Brazil 2025 coffee production estimate to 55.7 million bags from January’s estimate of 51.81 million bags. Concerns surrounding demand are further weighing on prices, as major global commodity importers like Starbucks, Hershey, and Mondelez International indicated that the U.S.’s baseline 10% tariff on imports could elevate prices and adversely impact sales volumes.

Weather Conditions and Crop Projections

Despite recent challenges, arabica coffee saw a rise to a two-and-a-half month high last Tuesday, while robusta reached a five-week high due to fears of a reduced Brazilian coffee crop. Rabobank predicted a -13.6% year-on-year decline in Brazil’s 2025/26 arabica coffee production, forecasting it would drop to 38.1 million bags, largely due to dry weather inhibiting flowering. Additionally, Cecafe noted that Brazil’s March green coffee exports fell -26% year-on-year to 2.95 million bags.

In Brazil, lackluster rainfall last week further supports coffee prices. Somar Meteorologia reported that Minas Gerais, the largest arabica-growing area, received only 1.5 mm of rain, about 21% of its historical average.

Vietnam’s Coffee Production and Exports

Robusta coffee received support on Tuesday as Vietnam’s National Statistics Office revealed that the country’s coffee exports for January to April 2025 decreased by -9.8% year-on-year to 663,000 MT. This trend corresponds with a significant reduction in Vietnam’s robusta production, which fell -20% to 1.472 million metric tons due to drought, marking it as the smallest crop in four years. The Vietnam Coffee and Cocoa Association also revised its 2024/25 coffee production estimate down to 26.5 million bags from an earlier figure of 28 million bags. Conversely, Rabobank expects Brazil’s robusta coffee crop to increase by +7.3% year-on-year to a record 24.7 million bags in 2025/26.

Global Export Dynamics and Outlook

Reports of increased global coffee exports are contributing to bearish market sentiment. Conab announced that Brazil’s 2024 coffee exports surged +28.8% year-on-year to a record 50.5 million bags, while the International Coffee Organization (ICO) reported a 2.1% decline in global coffee exports for the 2024/25 October-March period, down to 67.73 million bags.

The USDA’s biannual report on December 18 presented mixed signals for coffee prices. The Foreign Agriculture Service (FAS) forecasted a +4.0% year-on-year increase in world coffee production for 2024/25, reaching 174.855 million bags, which includes a +1.5% rise in arabica production to 97.845 million bags and a +7.5% increase in robusta production to 77.01 million bags. Additionally, ending stocks are predicted to decline by -6.6% to a 25-year low of 20.867 million bags, down from 22.347 million bags in 2023/24. On November 22, the FAS also revised Brazil’s 2024/25 coffee production estimate to 66.4 million metric tons, down from a previous forecast of 69.9 million metric tons.

For the 2025/26 marketing year, Volcafe reduced its Brazil arabica coffee production estimate to 34.4 million bags, approximately an 11 million bag drop from the September estimate, after a crop tour highlighted the severity of prolonged drought conditions in Brazil. Volcafe anticipates a global arabica coffee deficit of -8.5 million bags for 2025/26, deeper than the -5.5 million bag deficit projected for 2024/25, marking the fifth consecutive year of deficits.

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.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of any other organization.