Coffee Prices Surge as Supply Concerns Loom Ahead
March arabica coffee (KCH25) today is up +2.60 (+0.68%), and March ICE robusta coffee (RMH25) is up +69 (+1.25%).
Arabica Coffee Hits Record High Amid Supply Fears
Coffee prices increased today, with arabica reaching a new all-time high for nearest-futures. Concerns about global coffee supply are driving prices higher following a forecast from Conab, Brazil’s government crop forecasting agency. Last Tuesday, Conab projected that Brazil’s 2025/26 coffee crop will decline by -4.4% year-over-year to a three-year low of 51.81 million bags. Additionally, the agency reduced its estimate for Brazil’s 2024 coffee crop by -1.1%, now projecting 54.2 million bags, down from 54.8 million bags in September.
Brazilian Real Strengthens, Impacting Export Dynamics
The Brazilian real (^USDBRL) has gained strength, reaching a two-and-a-half month high against the dollar, which has a positive effect on coffee prices. A robust real discourages Brazilian coffee producers from selling exports.
Weather Woes: Rainfall and Long-term Effects of El Niño
On the downside, Brazil experienced above-normal rainfall, easing immediate dryness concerns. Somar Meteorologia reported that the Minas Gerais region, Brazil’s largest arabica coffee growing area, received 119 mm of rain last week, which is 203% of the historical average. However, the impact of dry El Niño weather last year may lead to long-term damage to coffee crops in South and Central America. Since last April, rainfall in Brazil has remained below average, affecting coffee trees during their critical flowering stage and diminishing the outlook for Brazil’s 2025/26 arabica coffee yield. Cemaden, a natural disaster monitoring center, noted that Brazil is experiencing its driest weather since 1981. Colombia, the second-largest producer of arabica coffee, is still recovering from drought conditions triggered by El Niño last year.
Robusta Production Decline Supports Prices
Prices for robusta coffee are also being supported due to a drop in production. The current drought has led to a 20% reduction in Vietnam’s coffee production for the 2023/24 crop year, producing only 1.472 million metric tons—the smallest harvest in four years. The USDA FAS projected on May 31 that Vietnam’s robusta production for 2024/25 will slightly decline to 27.9 million bags from 28 million bags in 2023/24. Furthermore, Vietnam’s General Statistics Office reported a -17.1% year-over-year decrease in coffee exports for 2024, totaling 1.35 million metric tons. However, on December 3, the Vietnam Coffee and Cocoa Association increased its 2024/25 production estimate to 28 million bags from 27 million bags previously.
Rising Inventories and Export Reports Weigh on Prices
Meanwhile, increasing robusta inventories have put downward pressure on prices. Last Friday, ICE-monitored robusta coffee inventories reached a three-and-a-quarter month high of 4,603 lots. In contrast, arabica coffee inventories monitored by ICE hit a two-and-a-half-year high of 993,562 bags on January 6, but have since dropped to a two-and-a-half month low of 856,177 bags as of Monday.
Global Coffee Exports Rise, Adding to Market Pressure
Reports of growth in global coffee exports are contributing to bearish sentiments in the market. On Tuesday, Conab announced that Brazil’s coffee exports for 2024 increased by +28.8% year-over-year to a record 50.5 million bags.
Global Production and Consumption Trends Raise Concerns
The International Coffee Organization (ICO) recently indicated that global coffee production for 2023/24 increased by +5.8% year-over-year to an unprecedented 178 million bags, attributed to an exceptional off-biennial crop year. Consumption also rose by +2.2% year-over-year to a record 177 million bags, creating a surplus of 1 million bags.
USDA Projections Offer Mixed Signals for Future Market
The USDA’s biannual report on December 18 presented mixed projections for coffee prices. The USDA Foreign Agriculture Service (FAS) anticipates a +4.0% increase in world coffee production for 2024/25, projecting a total of 174.855 million bags, which includes a +1.5% rise in arabica production (totaling 97.845 million bags) and a +7.5% increase in robusta production (totaling 77.01 million bags). Nonetheless, the USDA FAS forecast a -6.6% decline in ending stocks, reaching a 25-year low of 20.867 million bags from 22.347 million bags in 2023/24. Separately, the FAS on November 22 reported a forecast for Brazil’s 2024/25 coffee production at 66.4 million metric tons, down from a previous estimate of 69.9 million metric tons.
Drought Impact: Future Production Estimates Decline
For the 2025/26 marketing year, Volcafe adjusted its Brazil arabica coffee production estimate down to 34.4 million bags, approximately 11 million bags lower than the September estimate, following a crop tour that revealed the extent of Brazil’s ongoing drought. Volcafe now predicts a global arabica coffee deficit of -8.5 million bags for 2025/26, widening from the -5.5 million bag deficit in 2024/25, marking five consecutive years of supply 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
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