Coffee Prices See Mixed Trends Amid Supply Concerns and Production Reports

Arabica and Robusta Coffee Prices Climb, Driven by Supply Issues and Weather Woes

March arabica coffee (KCH25) saw an uptick of +1.20 (+0.37%) on Friday, while March ICE robusta coffee (RMH25) climbed +117 (+2.39%).

Coffee prices settled higher on Friday, with robusta coffee reaching a two-week high. Concerns about potential supply shortages from Vietnam, the largest robusta producer, are emerging as the country approaches the Lunar New Year holiday later this month. This period often disrupts bean supplies, leading to the recent surge in robusta prices, which has also bolstered arabica values.

On Monday, arabica coffee prices climbed to a three-week high, spurred by dry weather conditions in Brazil. According to Somar Meteorologia, Brazil’s key arabica coffee region, Minas Gerais, received only 29.6 mm of rain last week, translating to just 31% of the historical average.

Adding to the bearish sentiment was a report from Cecafe released Wednesday, revealing that Brazil’s 2024 arabica coffee exports surged by +20% year-on-year to a record 37 million bags, while robusta coffee exports jumped +98% year-on-year to a record 9.4 million bags. This surge in exports coincided with rising inventories, as ICE-monitored arabica coffee stocks hit a two-and-a-half-year high of 993,562 bags last Monday. Simultaneously, robusta coffee inventories also rose, reaching a three-and-a-half-month high of 4,422 lots on Friday.

High coffee prices in recent weeks stem from fears of a smaller Brazilian coffee crop. A record contract high for March arabica was reached, while the nearest Dec coffee contract (Z24) soared to record levels. The price hike followed a December 17 forecast from Volcafe, which lowered its estimate for Brazil’s arabica coffee production in 2025/26 to 34.4 million bags—down about 11 million bags from September’s prediction. This adjustment was attributed to severe drought conditions. Volcafe also predicts an arabica coffee deficit of 8.5 million bags globally for 2025/26, exceeding the 5.5 million bag deficit expected for 2024/25, marking five consecutive years of global deficits.

Consulting firm Safras & Mercado provided some support for coffee prices on December 20, estimating Brazil’s 2025/26 coffee crop at 62.45 million bags, down 5% year-over-year. They forecast a -15% decline in arabica output to 38.35 million bags due to prolonged drought while estimating robusta production at 24.1 million bags.

The ongoing influence of dry El Niño weather conditions may result in lasting damage to coffee crops in South and Central America. Rainfall in Brazil has been below average since April 2022, leading to damage during the crucial flowering stage, which endangers the future prospects of Brazil’s 2025/26 arabica coffee crop. Cemaden, the national disaster monitoring center, reports that Brazil is experiencing its driest conditions since 1981. Colombia, the second-largest arabica producer, is also slowly recovering from last year’s drought, worsened by El Niño.

Robusta coffee prices remain supported by a notable reduction in robusta production. Vietnam’s coffee production for the 2023/24 crop year has decreased by -20% to 1.472 MMT, marking the lowest yield in four years. The USDA FAS projected a slight dip in Vietnam’s robusta production for the upcoming 2024/25 season, estimating it at 27.9 million bags down from 28 million bags. Furthermore, export figures from Vietnam show a -17.1% year-on-year decrease, now totaling 1.35 MMT. However, the Vietnam Coffee and Cocoa Association rose its production estimate to 28 million bags for 2024/25—up from an earlier 27 million estimate in October.

Increased global coffee exports are another bearish factor for prices. The International Coffee Organization (ICO) reported a +15.1% increase in global coffee exports for October 2024/25, reaching 11.13 million bags. Over the entire 2023/24 season, global coffee exports increased by +11.7% year-on-year to 137.27 million bags. Meanwhile, Brazilian export figures have also confirmed a strong increase, with Cecafe reporting a +30.2% rise in Brazil’s 2024 coffee exports to a record 46.3 million bags.

Looking ahead, a report from the ICO indicated that global coffee production for 2023/24 increased by +5.8% year-on-year to a record 178 million bags, thanks to an exceptionally high off-biennial production year. Coffee consumption grew as well, rising +2.2% to a record 177 million bags, which has resulted in a surplus of 1 million bags in the market.

A mixed outlook emerged from the USDA’s biannual report on December 18. The USDA’s Foreign Agriculture Service (FAS) projected a +4.0% increase in world coffee production for 2024/25 to 174.855 million bags, with an estimated +1.5% rise in arabica production to 97.845 million bags and a +7.5% rise in robusta production to 77.01 million bags. However, ending stocks for 2024/25 are expected to fall by -6.6%, reaching a 24-year low of 20.867 million bags compared to 22.347 million bags in 2023/24. Additionally, the USDA previously forecasted Brazil’s 2024/25 coffee production at 66.4 MMT, revising down from an earlier estimate of 69.9 MMT and predicting inventories to dip by -26% year-on-year to 1.2 million bags by June 2025.

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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.