Coffee Prices Surge Amid Supply Concerns and Global Trends
March arabica coffee (KCH25) closed up +2.45 (+0.64%) on Tuesday, while March ICE robusta coffee (RMH25) rose by +24 (+0.43%).
Arabica Coffee Reaches New Heights
Tuesday saw coffee prices increase steadily, with arabica coffee hitting a record high in nearest-futures trading. This rise comes alongside concerns over global coffee supply as Brazil’s government forecasting agency, Conab, predicted a 4.4% decline in the country’s 2025/26 coffee crop, forecasting a three-year low of 51.81 million bags. Furthermore, Conab revised its 2024 estimate down by 1.1%, adjusting it from 54.8 million bags to 54.2 million bags.
Brazilian Real Rallies, Impacting Export Dynamics
Support for coffee prices is provided by a strengthening Brazilian real (^USDBRL), which surged to a two-and-a-half-month high against the dollar. A stronger currency deters Brazilian coffee producers from selling their exports.
Rains Bring Mixed Signals
Despite the increase in prices, excessive rainfall in Brazil raises concerns for supply as well; recent data from Somar Meteorologia shows that the Minas Gerais region, Brazil’s leading arabica producer, received 119 mm of rain—203% of the historical average—last week. While this eases dryness fears, many producers still contend with the ongoing impacts of last year’s dry El Nino conditions. Since April, overall rainfall in Brazil has been below average, risking damage to coffee trees at critical growth stages.
Vietnam’s Coffee Production Takes a Hit
Meanwhile, robusta coffee prices are influenced by a decrease in production. Vietnam has seen its output drop by 20% this year to 1.472 million metric tons, marking its lowest crop yield in four years. The USDA Foreign Agricultural Service (FAS) projected that Vietnam’s robusta production will dip slightly to 27.9 million bags in the upcoming 2024/25 marketing year from 28 million bags last season. Additionally, the Vietnam General Statistics Office disclosed a 17.1% year-over-year decline in 2024 coffee exports, totaling 1.35 million tons.
Inventory Trends and Export Dynamics Affect Prices
Robusta coffee inventories have risen, casting a bearish outlook on prices, as ICE-monitored stocks reached a three-and-three-quarter-month high of 4,603 lots last Friday. In contrast, arabica coffee inventories, which had climbed to a two-and-a-half-year peak of 993,562 bags, fell back to a two-and-a-half-month low of 854,953 bags as of Tuesday.
Global Production and Consumption Statistics
Recent reports from Conab suggest that Brazil’s coffee exports for 2024 are on course to increase by 28.8% year-over-year, totaling an unprecedented 50.5 million bags. Adding to the bearish sentiment are findings from the International Coffee Organization (ICO), which indicated that global coffee production for 2023/24 increased by 5.8% year-over-year, reaching a record 178 million bags. Meanwhile, consumption rose by 2.2%, creating a slight surplus of 1 million bags.
USDA’s Mixed Projections
The USDA’s biannual report on coffee prices delivered mixed signals. They project global coffee production in 2024/25 to rise 4.0% year-over-year to 174.855 million bags, with arabica production increasing by 1.5% to 97.845 million bags and robusta production up by 7.5% to 77.01 million bags. However, they also anticipate that ending stocks will drop by 6.6% to a 25-year low of 20.867 million bags.
Future Outlook for Brazilian Coffee
Looking ahead, Volcafe adjusted its 2025/26 Brazil arabica coffee production estimate to 34.4 million bags, a significant cut of about 11 million bags from its previous September forecast. This could lead to a global arabica coffee deficit of 8.5 million bags in 2025/26, reflecting a continuing trend of deficits for the fifth consecutive year.
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.
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