Coffee prices have been climbing, driven by significant supply concerns in key coffee-producing countries, particularly Brazil and Vietnam. As of today, March arabica coffee (KCH25) has increased by +0.85 (+0.26%), while January ICE robusta coffee (RMF25) has surged +180 (+3.49%).
The price jump follows a report from the Vietnam General Statistics Office, revealing that Vietnam’s coffee exports for November 2023 dropped by -49.1% year-on-year, totaling just 60,000 metric tons. From January to November, the country’s coffee exports were down -14.3% year-on-year, at 1.2 million metric tons. Adverse weather conditions, including recent flooding in Vietnam, have delayed the robusta coffee harvest, putting further pressure on supply. Vietnam, the world’s largest producer of robusta coffee, is now in the midst of its coffee harvest.
Weather disruptions in Brazil and Vietnam, the world’s two largest coffee producers, have been driving global coffee prices higher. Brazil has been grappling with dry El Niño conditions this year, which are expected to cause long-term damage to coffee crops in South and Central America. Brazil’s rainfall has been significantly below average since April, damaging coffee trees during the critical flowering stage, and potentially reducing yields for the 2025/26 arabica crop. According to Cemaden, Brazil is experiencing its driest weather since 1981.
In addition to the weather impacts, the USDA’s Foreign Agricultural Service (FAS) lowered its projections for Brazil’s 2024/25 coffee production to 66.4 million bags, down from an earlier forecast of 69.9 million bags. The National Supply Company (Conab) also reduced its 2024 forecast for Brazil’s coffee crop to 54.8 million bags from May’s estimate of 58.8 million bags.
While the weather challenges in Brazil and Vietnam are pushing coffee prices higher, there are also factors that could support continued price gains. The USDA has projected a global coffee surplus for the 2023/24 season, with production up 5.8% year-on-year, reaching a record 178 million bags. Additionally, ICE-monitored arabica coffee inventories have surged to a 2-1/3 year high of 905,831 bags, up from a 24-year low of 224,066 bags in November 2023. On the other hand, robusta coffee inventories on ICE have dropped to a 7-1/2 month low of 3,674 lots, indicating tightening supplies.
Despite these inventory gains, Vietnam’s robusta coffee production for the 2023/24 crop year is down -20%, reaching just 1.472 million metric tons, the smallest crop in four years. The USDA’s FAS has also projected a slight decline in robusta production for the 2024/25 marketing year to 27.9 million bags from 28 million bags in 2023/24.
The rising prices have prompted some Brazilian coffee exporters to unwind their hedges and buy coffee futures to cover short positions, further boosting prices.
While supply disruptions continue to support coffee prices, global coffee exports have seen an uptick. The International Coffee Organization (ICO) reported that October 2023 global coffee exports for the beginning of the 2024/25 season rose +15.1% year-on-year to 11.13 million bags. Additionally, 2023/24 global coffee exports grew +11.7% year-on-year to 137.27 million bags.
The current volatility in coffee prices is a reflection of the complex balance between supply disruptions, tight inventories, and increasing demand. As Brazil and Vietnam continue to face challenging weather, coffee markets are likely to remain volatile in the short term.
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