Coffee Prices Rise Amid Weather Concerns and Supply Fluctuations
Arabica Coffee Sees Gains While Robusta Faces Supply Pressure
March arabica coffee (KCH25) is up +7.30 (+2.27%), and March ICE robusta coffee (RMH25) is up +41 (+0.84%) today.
Impact of a Weak Dollar and Brazil’s Dry Conditions
Coffee prices have increased moderately as a weaker dollar has led to short covering in coffee futures.
Brazil’s Rainfall Shortfall Influences Prices
Dry weather in Brazil is supporting coffee prices. Arabica coffee hit a 3-week high on Monday, as Somar Meteorologia reported that the Minas Gerais region, Brazil’s top arabica coffee growing area, received only 29.6 mm of rain last week, representing 31% of its historical average.
Robusta Coffee’s Decline Linked to Increased Supply
Robusta coffee prices slipped to a 2-week low on Tuesday due to indications of larger supplies from Vietnam. The General Department of Vietnam Customs reported a remarkable +102.6% year-over-year increase in coffee exports in December, totaling 127,655 MT.
Rising Inventory Levels Weigh on Coffee Prices
Bearish sentiment is also fueled by rising coffee inventories. ICE-monitored arabica coffee stocks reached a 2-1/2 year high last Monday at 993,562 bags, while robusta coffee inventories hit a 3-month peak last Wednesday at 4,415 lots.
Future Outlook for Brazilian Coffee Production
Last month’s coffee price rally was largely due to expectations of a smaller Brazilian coffee crop. March arabica reached a contract high, and the December nearest-futures contract (Z24) set a record. A significant cut in Volcafe’s December 17 estimate for Brazil’s arabica production—down to 34.4 million bags for 2025/26 from an earlier projection of 45 million bags due to drought—has sparked sharp price increases. Volcafe anticipates a global arabica coffee deficit of 8.5 million bags in 2025/26, exceeding the previous year’s 5.5 million bag deficit.
Drought Impact on Crop Yields in Brazil and Colombia
Projections from Safras & Mercado on December 20 also weighed in, estimating Brazil’s 2025/26 coffee crop at 62.45 million bags, down -5% year-over-year. The forecast includes a projected -15% reduction in arabica output to 38.35 million bags due to ongoing drought conditions.
Long-term Effects from Last Year’s El Niño
The El Niño weather pattern experienced last year could cause extended damage to coffee crops in South and Central America. In Brazil, rainfall has consistently lagged behind average since last April, impacting key growth phases for coffee trees. Cemaden describes Brazil as facing its driest weather since 1981, while Colombia is working to recover from a drought spurred by El Niño.
Challenges for Vietnamese Robusta Production
Robusta production also faces challenges due to drought conditions in Vietnam. The 2023/24 crop year saw Vietnam’s coffee production decline by -20% to 1.472 million metric tons, marking the lowest output in four years. The USDA FAS projected a slight decrease in Vietnam’s robusta production in 2024/25 to 27.9 million bags from 28 million bags in the previous season. However, the Vietnam Coffee and Cocoa Association recently raised its production forecast for 2024/25 from 27 million to 28 million bags.
Global Coffee Export Trends and Their Impact
News regarding increased global coffee exports could suppress coffee prices. The International Coffee Organization (ICO) reported a +15.1% year-over-year rise in worldwide coffee exports for October, reaching 11.13 million bags. Additionally, Brazil’s green coffee exports surged by +2.7% year-over-year to 4.29 million bags, contributing to a record total of 47.3 million bags for the 2023/24 season.
Mixed Projections from the USDA
The USDA’s biannual report released on December 18 presented a mixed outlook for coffee. World coffee production for 2024/25 is expected to rise +4.0% year-over-year to 174.855 million bags. This projection includes an increase of +1.5% for arabica production to 97.845 million bags and a +7.5% rise in robusta production to 77.01 million bags. The USDA forecasts that 2024/25 ending stocks will drop -6.6% to a 24-year low of 20.867 million bags.
Despite an expected rise in production, the USDA has adjusted Brazil’s 2024/25 coffee output to 66.4 million metric tons, a revision from 69.9 million metric tons, highlighting the ongoing challenges in the region.
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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
