Coffee Prices Edge Higher Amid Supply Fears and Tariff Pause

May arabica coffee (KCK25) closed up +1.15 (+0.34%) on Thursday, while May ICE robusta coffee (RMK25) rose by +64 (+1.31%).

The uptick in coffee prices came as President Trump announced a pause on reciprocal tariffs, alleviating some concerns about the global economy and commodity demand. Coffee prices remain supported by ongoing supply fears, as Cecafe reported a 26% year-on-year drop in Brazil’s March green coffee exports, totaling 2.95 million bags. Additionally, robusta coffee has seen gains due to declining inventories; ICE-monitored robusta stocks fell to a five-week low of 4,260 lots on Thursday.

Market Context: Recent Trends in Coffee Prices

Earlier in the week, arabica coffee dropped to a 2-3/4 month low amid fears surrounding the global trade war, which negatively impacted several commodities. Analysts voiced concerns that higher tariffs could dampen coffee demand, causing prices to rise for U.S. consumers.

In the past month, easing dryness fears in Brazil placed pressure on coffee prices. Recent data from Somar Meteorologia indicated that Brazil’s primary arabica-growing region, Minas Gerais, received 39 mm of rain during the week ending April 5, surpassing historical averages by 188%.

Future Projections for Brazil’s Coffee Harvest

Brazil’s Conab, the government’s crop forecasting agency, projects a 4.4% decline in the 2025/26 coffee crop, predicting a crop yield of 51.81 million bags, a three-year low. The agency also revised its 2024 Brazil coffee crop estimate down by 1.1%, now forecasting it at 54.2 million bags, down from 54.8 million bags.

Increased arabica inventories also pose a challenge for prices; on Thursday, ICE-monitored arabica stocks reached a three-week high of 785,559 bags.

Furthermore, Cooxupe, Brazil’s largest arabica coffee cooperative, noted that high temperatures and below-normal rainfall in the previous month could adversely affect this year’s coffee yields.

Global Coffee Supply Outlook

Bearish signals for coffee come from Marex Solutions, which reported on March 7 that they anticipate the global coffee surplus for the 2025/26 season to expand to 1.2 million bags, compared to a surplus of 200,000 bags in 2024/25. Increased robusta production is anticipated, with projections of 28.8 million bags from Vietnam (up 7.9% year-on-year) and 25 million bags from Brazil (up 13.6% year-on-year).

Last year’s dry El Niño weather may have longer-term implications for coffee crops in South and Central America. Brazil has experienced its driest conditions since 1981, adversely affecting coffee trees during the critical flowering phase and reducing expectations for the 2025/26 arabica crop. Colombia, the second-largest arabica producer, is slowly recovering from last year’s drought conditions.

Vietnam’s robusta production decreased significantly due to drought, leading to a 20% reduction in the 2023/24 crop to 1.472 million metric tons, the lowest output in four years. Recent reports indicate that Vietnam’s coffee exports in 2024 are expected to fall by 17.1% year-on-year to 1.35 million metric tons. The Vietnam Coffee and Cocoa Association has also revised its production estimate for 2024/25 down to 26.5 million bags from the previous 28 million bags.

Impact of Global Exports on Coffee Prices

News of increasing global coffee exports may negatively impact prices. Conab reported on February 4 that Brazil’s 2024 coffee exports surged by 28.8% year-on-year to a record high of 50.5 million bags. However, the International Coffee Organization noted that global coffee exports decreased by 12.4% year-on-year in December to 10.73 million bags, with total exports from October to December declining by 0.8% to 32.25 million bags.

The USDA’s biannual report released on December 18 was mixed for the coffee market: it projected a 4.0% increase in world coffee production for 2024/25, totaling 174.855 million bags. Arabica production is expected to rise by 1.5% to 97.845 million bags, while robusta production is forecasted to increase by 7.5% to 77.01 million bags. The USDA anticipates a 6.6% reduction in ending stocks for 2024/25, dropping to a 25-year low of 20.867 million bags from 22.347 million bags in 2023/24.

Looking ahead to the 2025/26 marketing year, Volcafe has lowered its Brazil arabica coffee production estimate to 34.4 million bags, down 11 million bags from its September estimate. They also forecast a global arabica coffee deficit of 8.5 million bags, widening from the projected 5.5 million bag deficit for 2024/25, marking five consecutive years of deficits.

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

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