Coffee Prices Rise Amid Supply Concerns and Weather Challenges

May arabica coffee (KCK25) closed up +9.00 (+2.50%) on Tuesday, while May ICE robusta coffee (RMK25) also increased, closing up +110 (+2.09%).

On Tuesday, coffee prices continued to rise, reaching one-week highs and building on Monday’s gains. Concerns about below-normal rainfall in Brazil are fueling this upward trend. Somar Meteorologia reported that Brazil’s principal arabica coffee-producing area, Minas Gerais, received only 17.9 mm of rain in the week ending April 12, which is just 89% of the historical average. Furthermore, robusta coffee prices are increasing as traders note tighter supplies; ICE-monitored robusta coffee inventories fell to a six-week low of 4,249 lots on Monday.

Impact of Supply Concerns on Coffee Prices

Market fears surrounding supply shortages support the rise in coffee prices. According to Cecafe, Brazil’s coffee exports in March fell by 26% from last year, totaling 2.95 million bags. Additionally, on January 28, Conab, Brazil’s governmental crop forecasting agency, predicted a 4.4% decline in the 2025/26 coffee crop, which would hit a three-year low of 51.81 million bags. They also revised their 2024 production estimate downward by 1.1% to 54.2 million bags from a previous estimate of 54.8 million bags.

Support for coffee prices is further reinforced by Cooxupe, Brazil’s largest arabica coffee cooperative, which indicated that high temperatures and insufficient rainfall last month could adversely affect this year’s coffee yields. As the world’s leading producer of arabica coffee, Brazil’s production levels are critical for maintaining market stability.

However, just last Wednesday, arabica coffee prices fell to a three-month low amid global trade war tensions that impacted various commodities, coffee included. Concerns persist that heightened tariffs may reduce coffee demand, leading to increased prices for U.S. consumers.

In a conflicting market signal, arabica coffee inventories recently increased. ICE-monitored arabica coffee stocks climbed to a four-week high of 790,337 bags on Tuesday, which typically exerts downward pressure on prices.

Global Production Forecasts and Their Effects

On the downside, Marex Solutions projected a widening global coffee surplus for the 2025/26 season, forecasting a surplus of 1.2 million bags, compared to just 200,000 bags in the preceding season. Additionally, increased global supplies could negatively impact robusta coffee prices. They estimate that Vietnam’s robusta production will reach 28.8 million bags for 2025/26, a 7.9% increase year-over-year, while Brazil’s robusta production could reach 25 million bags, up 13.6% year-over-year.

The repercussions of last year’s dry El Nino can lead to prolonged damage to coffee crops across South and Central America. Consistently below-average rainfall in Brazil since April 2022 has harmed coffee trees during the crucial flowering period, complicating prospects for the 2025/26 arabica crop. Brazil is currently experiencing its driest weather since 1981, according to the natural disaster monitoring agency Cemaden, while Colombia is gradually recovering from the drought that was exacerbated by El Nino.

Robusta coffee is seeing some support owing to reduced production levels. Due to drought conditions, Vietnam’s coffee output for the 2023/24 crop year dropped by 20% to 1.472 million metric tons (MMT), making it the lowest output in four years. Furthermore, the Vietnam General Statistics Office reported a 17.1% decline in coffee exports from 2024, amounting to 1.35 MMT. Lastly, the Vietnam Coffee and Cocoa Association cut its 2024/25 production forecast to 26.5 million bags, down from 28 million bags previously estimated.

Global Export Trends and Market Impact

News of increasing global coffee exports is another bearish indicator for prices. Conab reported on February 4 that Brazil’s coffee exports for 2024 could rise by 28.8% year-over-year to a record 50.5 million bags. In contrast, the International Coffee Organization (ICO) reported a 12.4% decline in global coffee exports for December compared to the previous year, totaling 10.73 million bags, while exports from October to December fell by 0.8% to 32.25 million bags.

The USDA’s biannual report released on December 18 presented mixed signals for coffee prices. Its Foreign Agriculture Service (FAS) projects that 2024/25 world coffee production will increase by 4.0% year-over-year to 174.855 million bags. Within this projection, arabica production is expected to rise by 1.5% to 97.845 million bags, while robusta production could see a 7.5% uptick to 77.01 million bags. However, FAS forecasts a -6.6% reduction in ending stocks for 2024/25 to a 25-year low of 20.867 million bags.

On December 17, Volcafe revised its 2025/26 Brazil arabica coffee production estimate down to 34.4 million bags, decreasing by approximately 11 million bags from earlier assessments. This adjustment highlights the anticipated deficit of 8.5 million bags for global arabica coffee in 2025/26, 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 are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.

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