Coffee Prices Dip Amid Rain Projections in Brazil
December arabica coffee (KCZ24) is down -0.15 (-0.06%), while November ICE robusta coffee (RMX24) has decreased -53 (-1.08%).
Weather Impacting Prices
Today’s coffee prices are trending lower due to rain forecasts in Brazil. Meteorologist Climatempo indicates that Brazil’s major coffee-producing regions are set to receive substantial rainfall this weekend. This development is expected to alleviate drought issues, positively impacting Brazil’s coffee yield. Additionally, the Brazilian real (^USDBRL) has fallen to a 2-1/4 month low against the dollar, prompting increased export activity from Brazilian coffee growers.
Drought’s Toll on Future Yields
Though rain is approaching, prolonged dryness in Brazil could still affect coffee outputs. Since April, the rainfall levels have been notably below average, which has harmed coffee trees during their crucial flowering phase. This setback may reduce expectations for the 2025/26 arabica coffee harvest. Recently, Somar Meteorologia reported that Minas Gerais, which produces about 30% of Brazil’s arabica coffee, received 33.4 mm of rain last week—close to 99% of the historical average.
Inventories Providing a Buffer
Current coffee inventory levels are preventing more significant price declines. On October 3, ICE-monitored arabica coffee stocks fell to a 4-1/4 month low of 795,874 bags, while robusta inventories dropped to 4,054 lots today, marking a 5-month low. Until recently, arabica inventories reached a 1-1/2 year high of 858,474 bags on September 12, increasing from a 24-year low of 224,066 bags in November 2023. Simultaneously, ICE-monitored robusta inventories had risen to a 1-year high of 6,521 lots on July 25, improving from a record low of 1,958 lots in February 2024.
Global Export Trends
A recent report from the International Coffee Organization (ICO) highlighted a 6.5% year-on-year rise in global coffee exports for August to 10.92 million bags, and a 9.9% increase from October to August, totaling 125.67 million bags. Last Wednesday, Cecafe also noted that Brazil’s green coffee exports for September surged 34% year-on-year to 4.1 million bags, aligning with earlier reports of increased exports. In fact, on July 11, Cecafe revealed that Brazil’s total coffee exports for the 2023/24 period reached a record 47.3 million bags, up 33% year-on-year.
Market Performance
On September 26, arabica coffee futures hit a 13-year high, while robusta prices reached a record contract high. This price surge was driven by adverse weather in key coffee-growing regions that threatened global supply. According to Cemaden, Brazil is facing some of the driest conditions since 1981. The forecasted rains could be a crucial turning point for the market.
Concerns in Vietnam Affect Robusta
Robusta coffee prices are also influenced by worries over potential crop damage in Vietnam due to drought. The country’s agriculture department reported a 20% drop in coffee production for the 2023/24 season, resulting in 1.472 million metric tons—the lowest yield in four years. Projections by the USDA’s Foreign Agriculture Service indicated that Vietnam’s robusta output for 2024/25 may decline slightly to 27.9 million bags from 28 million in the previous season. Furthermore, a report from Vietnam Customs showed a 32.6% month-over-month drop in coffee exports for September, with a year-to-date decrease of 11.7% in total exports.
Adjustments to Brazilian Production Forecasts
Brazil’s crop forecasting agency, Conab, has reduced its coffee production estimate for 2024 from 58.8 million bags down to 54.8 million, reflecting ongoing weather challenges. In contrast, the ICO reported earlier in May that global coffee output for 2023/24 is projected to rise by 5.8% year-on-year to 178 million bags, which may create a surplus. The USDA’s annual report suggested that world coffee production for the 2024/25 season could increase by 4.2% to 176.235 million bags, with arabica production estimated to rise by 4.4% to 99.855 million bags.
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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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