Coffee Prices Surge as Farmers Hold Supplies in Brazil
Robusta and Arabica Coffee Experience Significant Price Rallies
December arabica coffee (KCZ24) today is up +6.95 (+2.64%), and January ICE robusta coffee (RMF25) is up +62 (+1.37%).
Coffee prices have continued their upward trend this week, with arabica reaching a six-week high while robusta is at a three-week high. Brazilian coffee farmers are strategically withholding coffee supplies from the market, hoping for increased prices. This tactic has tightened the cash market, resulting in rising prices. The situation is further supported by forecasts of hot and dry conditions in Minas Gerais, the largest arabica-producing area in Brazil. Meteorologist Climatempo noted on Monday that, following a brief rain mid-week, the region is expected to become hotter and drier over the next ten days.
A tightening supply of robusta is also favoring its market, as Vietnam’s General Department of Customs reported a decrease in October coffee exports by -11.6% month-on-month to 45,412 metric tons. The country’s coffee exports from January to October fell by -11.1% year-on-year to 1.15 million metric tons. Concerns about impending heavy rain in Vietnam have also emerged, which could threaten the coffee harvest as the country enters its production season.
Long-term support for coffee prices arises from fears of crop damage in Brazil due to ongoing drought conditions. Since April, Brazil has seen consistently below-average rainfall, adversely affecting coffee trees during the critical flowering phase. This has significantly lowered expectations for the 2025/26 arabica crop. Notably, Brazil is experiencing its driest weather since 1981, according to the national disaster monitoring center, Cemaden.
Reducing robusta production further stabilizes robusta coffee prices. The Vietnamese agriculture department reported a -20% drop in the 2023/24 crop year production, marking it as the smallest crop in four years, largely due to drought. The USDA Foreign Agricultural Service (FAS) has also forecast a slight decrease in Vietnam’s robusta production for the upcoming 2024/25 marketing year, dipping to 27.9 million bags from 28 million bags in 2023/24.
In addition, Brazil’s crop forecasting agency, Conab, has scaled down its 2024 coffee production prediction from 58.8 million bags to 54.8 million bags as of September 19. This review reflects the ongoing challenges within the coffee market.
On a potentially bearish note for prices, the International Coffee Organization (ICO) noted a significant increase in global coffee exports for September, rising +25% year-on-year to 10.76 million bags. Furthermore, exports from October to September grew +11.7% year-on-year to 137.27 million bags.
Recently recorded rainfall in Brazil could have negative implications for coffee prices. Somar Meteorologia reported that the Minas Gerais region received 123.9 mm of rain last week, equating to 349% of the historical average, which may counter some of the tightening supply benefits.
However, tight coffee inventories are helping support prices. Earlier this year, ICE-monitored arabica inventories partially rebounded from a 24-year low of 224,066 bags in November 2023, reaching a one-and-a-half-year high of 863,440 bags last Tuesday. In contrast, ICE-monitored robusta inventories hit a six-and-a-half-month low of 3,854 lots after previously soaring to a one-and-three-quarter-year high of 6,521 lots in July, while still remaining moderately above the record low of 1,958 lots recorded in February 2024.
Some recent news on Brazilian coffee exports has proven bearish. Cecafe reported a +11% year-on-year increase in Brazil’s green coffee exports for October to 4.57 million bags. Furthermore, Brazil’s total coffee exports for the 2023/24 year increased by +33% year-on-year, reaching a record 47.3 million bags.
Lastly, the ICO’s projection last month indicated a +5.8% year-on-year increase in global coffee production, forecasting it to reach a record 178 million bags due to an exceptional off-biennial crop year. The organization also anticipates a +2.2% rise in global coffee consumption, resulting in a surplus of 1 million bags.
The USDA’s bi-annual report from June was unfavorable for coffee prices, predicting a +4.2% increase in world coffee production for 2024/25 to 176.235 million bags. The report indicates a +4.4% growth in arabica production and a +3.9% rise in robusta production. The USDA further projects an increase in ending stocks for 2024/25 to 25.78 million bags, up from 23.93 million bags in 2023/24. Additionally, Brazil’s arabica production for 2024/25 is expected to increase by +7.3% as yields improve and more land is planted.
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On the date of publication,
Rich Asplund
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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.
