Coffee Prices Rise Amid Supply Concerns and Weather Challenges
Robusta Hits 1.5-Week High; Brazil Faces Drought
On Wednesday, March arabica coffee (KCH25) closed up +18.35 (+4.44%), while March ICE robusta coffee (RMH25) rose by +164 (+2.90%). Coffee prices surged sharply, with robusta reaching a 1.5-week high and arabica hovering just below Tuesday’s record-high levels for nearest-futures.
Declining Exports from Brazil Boost Prices
Reports of shrinking coffee supplies from Brazil are supporting the bullish trend in prices. Cecafe announced that Brazil’s green coffee exports for January dropped -1.6% year-over-year to 3.98 million bags.
Concerns Grow Over Brazil’s Coffee Crop
Recent rainfall reports from Brazil have raised crop reliability concerns. Somar Meteorologia noted that the key arabica-growing state of Minas Gerais only received 53.9 mm of rain last week—just 85% of the historical average. As the largest arabica coffee producer globally, Brazil’s weather conditions are critical.
Supply Fears Amplified by Drought
Lingering worries about global coffee supply persist. On January 28, Conab, Brazil’s government crop forecasting agency, estimated a -4.4% year-over-year reduction in Brazil’s coffee crop for 2025/26, predicting it would hit a 3-year low of 51.81 million bags. They also cut the 2024 crop forecast by -1.1% to 54.2 million bags.
Long-Term Effects of El Niño
El Niño’s impact from last year may lead to prolonged damage to coffee crops in South and Central America. Brazil has experienced below-average rainfall since April, affecting coffee trees at a critical growth stage. Cemaden reports that this is the driest period Brazil has faced since 1981. Meanwhile, Colombia, another key player in arabica production, is gradually recovering from its drought woes due to El Niño.
Robusta Production Faces Challenges
Robusta coffee prices are also supported by a reduction in production. Drought conditions led to a -20% drop in Vietnam’s coffee production for the 2023/24 crop year, which now stands at 1.472 MMT—the lowest in four years. The USDA FAS projected Vietnam’s robusta coffee production in 2024/25 would fall slightly to 27.9 million bags.
Shifting Coffee Supply Levels
Current coffee supplies are on the decline after a brief spike. Robust coffee inventories reached a four-month high of 4,603 lots on January 31 but fell to a 5-week low of 4,348 lots on Wednesday. In contrast, ICE-monitored arabica inventories peaked at a 2.5-year high of 993,562 bags on January 6 but have since declined to a 3.5-month low of 841,795 bags.
Global Coffee Exports Present Mixed Signals
Reports of increased global coffee exports could exert downward pressure on prices. According to Conab, Brazil’s coffee exports in 2024 rose by +28.8% year-over-year to a record 50.5 million bags. Similarly, Vietnam reported that its January coffee exports increased by +6.3% month-over-month to 134,000 MT.
Global Production Surplus Complicates Outlook
On a broader scale, the ICO reported that global coffee production for 2023/24 climbed +5.8% year-over-year, hitting a record 178 million bags. Meanwhile, consumption rose by +2.2% to an all-time high of 177 million bags, resulting in a surplus of 1 million bags.
USDA’s Forecasts Indicate Tightening Supplies
In its December 18 biannual report, the USDA projected a +4.0% increase in world coffee production for 2024/25, reaching 174.855 million bags. Estimates for arabica production increased by +1.5% to 97.845 million bags, while robusta is expected to rise by +7.5% to 77.01 million bags. However, ending stocks are predicted to drop by -6.6% to a 25-year low of 20.867 million bags.
Future Projections Remain Challenged
For the 2025/26 marketing year, Volcafe has reduced its Brazil arabica coffee production estimate to 34.4 million bags, approximately 11 million bags lower than an earlier September estimate. Volcafe anticipates a global arabica coffee deficit of -8.5 million bags, extending the trend into a fifth consecutive year.
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 here.
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