Coffee Prices Rise Amid Brazilian Drought Concerns
March arabica coffee (KCH25) is currently up +3.60 (+1.18%), with January ICE robusta coffee (RMF25) gaining +88 (+1.72%).
Recent Highs Compared to Today’s Prices
Though coffee prices have increased today, they are still below the peaks seen on Monday. On that day, March arabica reached a contract high, while December arabica hit a 27-year nearest-futures high. January robusta also attained a seven-week high.
Impact of Brazilian Drought on Coffee Production
Prices are climbing due to fears that Brazil’s ongoing drought may harm coffee crops in the long run. Rainfall in Brazil has been below average since April, damaging coffee trees during crucial flowering periods and putting the 2025/26 arabica coffee crop at risk. Cemaden, the natural disaster monitoring center, noted that Brazil is experiencing its driest weather in over 40 years.
Rain Data from Key Coffee-Growing Areas
Minas Gerais, Brazil’s main arabica coffee-producing region, is facing struggles as it only received 6 mm of rain last week—just 10% of the historical average. This lack of rainfall may significantly affect the country’s overall coffee output, which could drive prices even higher.
USDA’s Production Estimates Add to Price Pressure
Further supporting high prices, the USDA’s Foreign Agricultural Service (FAS) recently adjusted Brazil’s 2024/25 coffee production estimate down from 69.9 million metric tons (MMT) to 66.4 MMT. Additionally, Brazil’s coffee inventories are expected to shrink by 26% year-on-year to 1.2 million bags by the end of the 2024/25 season in June.
Concerns in Vietnam Affecting Robusta Coffee
Robusta coffee prices are also seeing upward pressure. Data from Vietnam’s General Department of Customs shows a decline in October coffee exports by 11.6% month-on-month, totaling 45,412 metric tons. Year-to-date, exports have decreased by 11.1% to 1.15 MMT. Heavy rains in Vietnam may further complicate the harvest for robusta, as farmers in the world’s largest robusta-producing country start gathering their crops.
Production Declines in Vietnam’s Coffee Sector
A report from Vietnam’s agriculture department revealed a 20% drop in coffee production for the 2023/24 crop year, marking the smallest output in four years due to unfavorable weather conditions. The USDA FAS has projected a slight decrease in Vietnam’s robusta coffee production for the 2024/25 marketing year, estimating it will fall to 27.9 million bags from 28 million bags in the previous year.
Revising Brazil’s Coffee Production Estimates
In another development, Brazil’s crop forecasting agency, Conab, lowered its 2024 coffee production forecast from 58.8 million bags to 54.8 million bags on September 19.
Global Coffee Supply Outlook
Conversely, reports from the International Coffee Organization (ICO) indicate a rise in global coffee supplies, which could pressure prices downward. The ICO noted on November 8 that global coffee exports increased by 25% year-on-year to 10.76 million bags in September, contributing to a total of 137.27 million bags for the October to September period, an 11.7% annual rise.
Inventory Trends Affecting Coffee Prices
The tight coffee inventory situation has also contributed to price support. ICE-monitored arabica coffee inventories rose from a 24-year low of 224,066 bags in November 2023 to a two-and-a-half year high of 893,325 bags last Thursday. Meanwhile, robusta coffee inventories are hovering around a six-and-three-quarter month low of 3,854 lots, following a high of 6,521 lots in July.
Recent Export Data from Brazil
Recent data from Cecafe revealed that Brazil’s green coffee exports rose by 11% year-on-year in October to 4.57 million bags. Overall, Brazil’s coffee exports for the 2023/24 season surged by 33% year-on-year to a record 47.3 million bags, indicating strong supply capabilities despite local shortages.
Global Production Surplus Projection
The ICO’s projection last month for the 2023/24 production year indicates a +5.8% increase to a record 178 million bags. Consumption is also expected to rise by +2.2% to 177 million bags, suggesting a slight surplus of one million bags.
USDA’s Findings on World Coffee Supply
In June, the USDA’s bi-annual report projected a +4.2% increase in world coffee production for 2024/25 to 176.235 million bags. This includes a +4.4% rise in arabica production to 99.855 million bags and a +3.9% rise in robusta production to 76.38 million bags. Ending stocks are anticipated to climb by +7.7% to 25.78 million bags.
On the date of publication, Rich Asplund did not hold any positions in the securities mentioned in this article. All information and data are purely for informational purposes. For more disclosure details, view the Barchart Disclosure Policy
here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
