Coffee Prices Surge Amid Supply Concerns and Weather Challenges
December arabica coffee (KCZ24) closed Thursday at +7.30 (+2.69%), while January ICE robusta coffee (RMF25) rose +145 (+3.13%).
On Thursday, coffee prices continued their upward trend, reaching a 13-year high for arabica and a one-month high for robusta. Investors are worried about potential supply issues following the European Parliament’s vote on new deforestation regulations. If European Union (EU) leaders do not reach a consensus by next month, the EU Deforestation Regulation will be enforced. This could impact coffee supplies from countries like Brazil and Indonesia, where deforestation is a concern. Under the EU’s Deforestation Regulation, products entering the EU must not have originated from areas deforested or degraded post-2020.
Minas Gerais, Brazil’s top arabica coffee-producing region, is bracing for continuing hot and dry weather, which could affect coffee quality. Following a brief period of rainfall mid-week, meteorologists report that temperatures will rise and drying conditions will extend over the next ten days.
Robusta coffee prices are supported by tight supplies. The General Department of Customs in Vietnam revealed that the country’s coffee exports fell by -11.6% from the previous month to 45,412 metric tons in October. Year-to-date exports from January to October also dropped by -11.1% compared to last year, totaling 1.15 million metric tons. Additionally, heavy rain in Vietnam poses a risk of flooding, which may further delay the coffee harvest for the world’s largest robusta producer.
Long-term concerns for coffee crops continue to rise, particularly due to ongoing drought conditions in Brazil. Rainfall has remained below average since April, harming coffee plants during their critical flowering phase and jeopardizing the nation’s 2025/26 arabica production. According to Cemaden, Brazil is experiencing its driest conditions in over four decades.
Robusta production in Vietnam has also been declining, with the agriculture department noting a decrease of -20% in the 2023/24 crop year, now down to 1.472 million metric tons—the smallest yield in four years. The USDA’s Foreign Agricultural Service (FAS) predicts a slight drop in robusta production to 27.9 million bags in the new 2024/25 marketing year.
Brazil’s crop forecasting agency, Conab, reduced its 2024 coffee production estimate to 54.8 million bags, a drop from the previous forecast of 58.8 million.
However, there are signs of larger global coffee supplies that may hinder price increases. The International Coffee Organization (ICO) reported a 25% year-on-year rise in global coffee exports in September, totaling 10.76 million bags. The cumulative exports from October to September increased by 11.7% year-on-year to 137.27 million bags.
Recent rainfall in Minas Gerais has been unfavorable for coffee prices, with Somar Meteorologia reporting 123.9 mm of rain last week—349% of the historical average for the area.
Tight coffee inventories still offer some support for prices. ICE-monitored arabica coffee stocks recovered from a 24-year low of 224,066 bags in November 2023 to a 1-3/4 year high of 873,589 bags by Thursday. Conversely, ICE-monitored robusta inventories have decreased to a six-and-a-half-month low of 3,854 lots after peaking at a 1-3/4 year high of 6,521 lots in July.
Moreover, Brazil’s coffee export performance has shown bearish trends. Cecafe reported a rise of +11% year-on-year in Brazil’s October green coffee exports to 4.57 million bags. The agency also highlighted a record shipment of 47.3 million bags in the 2023/24 season, an increase of +33% year-on-year.
In another note, the ICO recently predicted that global coffee production for 2023/24 would rise by +5.8% year-on-year, reaching a record 178 million bags, thanks to a significant off-biennial crop year. Global consumption is also projected to increase by +2.2% to a record 177 million bags, likely leading to a surplus of 1 million bags.
The USDA’s bi-annual report from June was similarly bearish for coffee prices. The FAS forecasted an overall increase of +4.2% in world coffee production for 2024/25 to 176.235 million bags, with arabica production up by +4.4% and robusta by +3.9%. Ending stocks for 2024/25 are expected to rise by +7.7%, indicating a shift towards better supply dynamics.
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.
