Coffee Prices Dip Amid Rising Global Supplies
March Arabica and Robusta Coffee Market Update
March arabica coffee (KCH25) today fell by -1.75 (-0.55%), while March ICE robusta coffee (RMH25) declined by -48 (-0.96%).
Market Pressures from Dollar Strength and Supply Increases
Overall, coffee prices are experiencing a drop today, with robusta hitting a one-week low. The strength of the dollar is putting downward pressure on most commodities, including coffee. An increase in supplies is also contributing to this trend, as arabica coffee inventories tracked by ICE reached a 2-1/2 year high of 993,562 bags on Monday. Additionally, robusta coffee inventories rose today to a three-month high of 4,415 lots.
Weather Concerns for Arabica Coffee
Arabica coffee is seeing some support due to below-average rainfall in Brazil. As reported by Somar Meteorologia, Brazil’s primary arabica growing region, Minas Gerais, received only 62.5 mm of rain last week, about 86% of the historical average.
Resilience of Robusta Due to Global Supply Trends
Robusta coffee is holding up better due to indications of smaller global supplies. Vietnam’s General Statistics Office reported a significant drop in coffee exports, which fell by -17.2% year over year to 1.343 million metric tons in 2024. As the world’s largest producer of robusta coffee, Vietnam’s situation could influence global prices.
Price Surge from Brazilian Crop Forecasts
Last month saw a sharp rally in coffee prices, driven by the expectation of a smaller coffee crop in Brazil. Arabica coffee futures for March reached a contract high, while the December nearest-futures contract (Z24) hit a record high. This surge followed a report from Volcafe on December 17 that downgraded Brazil’s 2025/26 arabica coffee production estimate to 34.4 million bags, significantly down from the 45 million bags initially projected in September due to an ongoing drought. Volcafe anticipates a wider global arabica coffee deficit of 8.5 million bags for 2025/26, compared to 5.5 million bags for 2024/25.
Consultancy Predictions and Mixed USDA Report
Further support for coffee prices came from a forecast by Safras & Mercado on December 20, which estimates the 2025/26 Brazilian coffee crop at 62.45 million bags, reflecting a 5% decrease year over year. They predict that arabica production will fall by 15% to 38.35 million bags due to ongoing drought, while robusta will produce 24.1 million bags. Meanwhile, the USDA’s biannual report on December 18 provided mixed signals for coffee prices. Their Foreign Agriculture Service (FAS) projected a 4.0% year-over-year increase in world coffee production for 2024/25, reaching 174.855 million bags, with arabica seeing a 1.5% rise and robusta a 7.5% rise.
Long-Term Weather Challenges and Crop Damage
The dry conditions brought on by El Nino last year are causing potential long-term damage to coffee crops in South and Central America. Brazil is experiencing its driest spell since 1981, with below-average rainfall damaging coffee trees during the critical flowering phase. Colombia, the second-largest arabica producer, is currently working to recover from the drought as well.
Robusta Production Declines in Vietnam
Robusta prices are facing their own challenges. Vietnam’s coffee production for the 2023/24 crop year dropped by -20% to 1.472 million metric tons, marking the smallest yield in four years due to persistent drought. The USDA FAS projected a slight decrease in Vietnam’s robusta production for 2024/25 to 27.9 million bags, while the Vietnam Coffee and Cocoa Association recently raised its estimate to 28 million bags from 27 million, hinting at some recovery.
Global Coffee Export Trends and Surpluses
On the bearish side, news of higher global coffee exports may inhibit prices. On December 5, the International Coffee Organization (ICO) noted a 15.1% year-over-year rise in global coffee exports for the early 2024/25 season, totaling 11.13 million bags. The total coffee exports for the 2023/24 season also increased by 11.7% to 137.27 million bags. Reports from Brazil have added to this trend; on December 23, Cecafe announced that Brazil’s green coffee exports rose by 2.7% year-over-year to 4.29 million bags, contributing to a record 47.3 million bags exported for the 2023/24 season.
Record Production Despite Supply Challenges
In a significant note, the ICO also reported that global coffee production for 2023/24 climbed by 5.8% year-over-year, reaching a record high of 178 million bags, thanks to an exceptional off-biennial crop year. Consumption during this period has risen by 2.2% to a record 177 million bags, resulting in a slight 1 million bag surplus.
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 are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
