Coffee Prices Surge on Weather Concerns and Production Forecasts

On Thursday, July arabica coffee (KCN25) closed up +13.05 (+3.38%), while May ICE robusta coffee (RMK25) rose by +56 (+1.05%). The rise in coffee prices extended this week’s upward trend, with arabica reaching a four-week high and robusta achieving a one-week high. A weaker U.S. dollar (DXY00) supported most commodity prices, including coffee.

Weather Impacts on Brazil’s Coffee Crop

Forecasts of limited rainfall in Brazil are bolstering coffee prices. Somar Meteorologia indicated that rain in Brazil’s key coffee-growing regions is expected to be sparse in the coming week. Additionally, Rabobank reported on Tuesday that Brazil’s arabica coffee crop for 2025/26 is expected to decline by 13.6% year-on-year to 38.1 million bags. This prediction results from dry conditions affecting flowering in critical arabica-growing areas. However, some upward potential for robusta may be curbed, as Rabobank anticipates a 7.3% increase in Brazil’s robusta coffee crop to a record 24.7 million bags for the same period.

Supply and Demand Dynamics

Concerns about yield reductions in Brazil due to below-average rainfall may support coffee prices. Reports from Somar Meteorologia noted that Brazil’s major arabica-growing area, Minas Gerais, received 17.9 mm of rain by April 12, which amounts to only 89% of the historical average.

Despite supportive supply fears, coffee supply has recently increased, which could weigh on prices. Last Thursday, ICE-monitored robusta coffee inventories reached a two-week high of 4,272 lots, and arabica inventories rose to 815,926 bags, the highest in two and a half months.

Global Market Influences and Export Performance

Ongoing global trade challenges continue to impact commodity prices, including coffee. There are worries that escalating tariffs could dampen demand in the United States as higher prices affect consumers. As for exports, Cecafe reported that Brazil’s green coffee exports in March fell by 26% year-on-year to 2.95 million bags. In line with this, Brazil’s government crop forecasting agency, Conab, has also revised its estimates, projecting a decline of 4.4% year-on-year for the country’s coffee crop to 51.81 million bags for 2025/26, along with a slight cut for the 2024 crop estimate.

Future Projections

Cooxupe, Brazil’s largest arabica coffee cooperative, added that high temperatures paired with below-normal rainfall last month would further damage yields this year, compounding the stress already felt in production areas. Brazil remains the leading producer of arabica coffee globally.

However, Marex Solutions warned that a projected global coffee surplus for the 2025/26 season could increase to 1.2 million bags, compared to a surplus of 200,000 bags in 2024/25. El Nino-induced drought from last year continues to affect crop performance in South and Central America, with Brazil experiencing its driest conditions in over four decades. Furthermore, Colombia, the second largest producer of arabica coffee, is gradually recovering from the drought conditions exacerbated by El Nino.

Robusta coffee has some support from reduced production, as drought has lowered Vietnam’s output for the 2023/24 crop year by 20%, yielding only 1.472 million metric tons, the smallest in four years. The Vietnam Coffee and Cocoa Association recently revised down its 2024/25 coffee production estimate to 26.5 million bags, highlighting a decrease from previous projections. Meanwhile, Vietnam’s coffee exports from January to March dropped by 15.3% year-on-year.

Market Insights from the USDA

A report from the USDA’s Foreign Agriculture Service presented mixed signals for coffee prices. They project global coffee production for 2024/25 to rise by 4% year-on-year to 174.855 million bags, with arabica rising by 1.5% to 97.845 million bags and robusta climbing by 7.5% to 77.01 million bags. However, ending stocks are expected to decrease by 6.6%, reaching a 25-year low of 20.867 million bags. Conab also updated its estimate for Brazil’s 2024/25 production to 66.4 million bags, down from earlier predictions.

Looking ahead to the 2025/26 marketing year, Volcafe reduced its estimate for Brazil’s arabica production significantly, forecasting only 34.4 million bags—about 11 million less than earlier forecasts—after severe drought conditions were confirmed during a crop tour. Volcafe warns of an arabica coffee deficit widening to 8.5 million bags, marking the fifth consecutive year of supply shortfalls.

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.

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