Coffee Prices Rise Amid Brazilian Crop Concerns
Key Factors Influencing Coffee Market Dynamics
March arabica coffee (KCH25) increased by +1.55 (+0.47%), while January ICE robusta coffee (RMF25) gained +33 (+0.65%).
Brazil’s Weather Impact on Arabica Prices
Arabica coffee prices are moving higher, bolstered by reduced rainfall last week in Brazil, the world’s leading arabica producer. According to Somar Meteorologia, Brazil’s top arabica region, Minas Gerais, received only 43.6 mm of rain, which is 83% of the historical average.
Robusta Prices Supported by Harvest Delays in Vietnam
Robusta coffee prices are also up today, as rain in Vietnam has slowed the coffee harvest. Tuan Loc Commodities noted that this wet weather is projected to continue until December 26, significantly impacting coffee harvesting.
Brazil’s Diminished Coffee Crop Estimated
Support for coffee prices has come from a recent report by consultancy group Safras & Mercado. They estimated Brazil’s 2025/26 coffee crop at 62.45 million bags, a 5% decrease from the previous year. The projection indicates a 15% decline in arabica output to 38.35 million bags due to drought, while robusta production is expected to be 24.1 million bags.
Weak Real Pressuring Coffee Producers
However, a weak Brazilian real (^USDBRL) remains a bearish influence on coffee prices. The currency is trading near record lows against the U.S. dollar, promoting export selling by Brazilian coffee producers.
Inventory Increases Indicate Supply Pressure
Another bearish signal for arabica coffee is the rise in current supplies. ICE-monitored arabica inventories surged to a 2.5-year high on Monday, totaling 990,395 bags. Similarly, robusta coffee inventories had risen to a two-month high of 3,996 lots, though they slightly declined to 3,995 lots on Monday, up from a 7.5-month low of 3,672 lots the previous week.
Recent Price Rallies and Future Projections
Over the past two weeks, coffee prices have sharply risen, primarily due to concerns about a smaller Brazilian coffee output. Last Tuesday, March arabica reached a contract high, while the December nearest-futures contract hit a record. Volcafe reported a drastic cut in its production estimate for Brazilian arabica coffee to 34.4 million bags, approximating an 11 million bag decrease from its September forecast, pointing to a growing global arabica coffee deficit of 8.5 million bags for 2025/26.
USDA Report Presents Mixed Signals
The USDA released a mixed bi-annual report last Wednesday, predicting a 4.0% year-on-year increase in global coffee production for 2024/25 to 174.855 million bags. Specifically, arabica production is expected to increase by 1.5% to 97.845 million bags, while robusta is projected to rise by 7.5% to 77.01 million bags. However, Brazilian production estimates were lowered to 66.4 million bags for 2024/25, down from a previous estimate of 69.9 million bags.
Vietnam’s Output Declines Due to Weather
Robusta coffee is receiving support from reduced production levels in Vietnam, where November exports plummeted by 47% year-on-year to 63,019 MT. Additionally, from January to November, coffee exports fell by 14% year-on-year to 1.22 MMT. Recent rain in Vietnam has flooded coffee fields, further delaying the harvest, which is significant given its status as the world’s largest robusta producer.
Long-Term Crop Damage from El Nino Weather
The effects of El Nino’s drier weather earlier this year may have longer-term implications for coffee crops in South and Central America. Since April, rainfall levels in Brazil have consistently been below average, harming coffee trees during their crucial flowering season. This marks Brazil’s driest weather period since 1981, according to Cemaden. At the same time, Colombia is slowly recovering from drought conditions exacerbated by El Nino.
Bearish Sentiment from Increased Global Exports
Recent reports of larger global coffee exports add to the bearish outlook for prices. The International Coffee Organization (ICO) noted a 15.1% year-on-year rise in global coffee exports during October, reaching 11.13 million bags. For the 2023/24 period, total global coffee exports increased by 11.7% to 137.27 million bags. Additionally, Cecafe reported that Brazil’s green coffee exports rose by 2.7% year-on-year to 4.29 million bags.
Record Global Production and Consumption Trends
The ICO recently announced that global coffee production for 2023/24 increased by 5.8% from the previous year, totaling a record 178 million bags. Simultaneously, coffee consumption also reached a record high at 177 million bags, creating a surplus of 1 million bags in the market.
At the time of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information in this article is for informational purposes. For more on our disclosure policy, please view the Barchart Disclosure Policy
here.
The views and opinions expressed herein are those of the author and do not necessarily reflect the opinions of Nasdaq, Inc.
