Coffee prices saw moderate gains today, with March arabica coffee (KCH25) up +8.40 (+2.63%) and January ICE robusta coffee (RMF25) rising +39 (+0.75%). The uptick comes as adverse weather conditions in key coffee-growing regions raise concerns about global supply shortages.
Brazil, the world’s largest coffee producer, is facing a significant drop in rainfall, particularly in Minas Gerais, the country’s largest arabica-growing region. According to Somar Meteorologia, rainfall in Minas Gerais last week was just 35.2 mm, or 65% of the historical average. This below-average rainfall could reduce Brazil’s coffee output, especially for arabica, which is expected to impact prices.
The robusta market is also seeing upward movement due to tightening supplies. ICE-monitored robusta coffee inventories fell to a 7-1/2 month low of 3,672 lots, which signals a potential shortage. This comes on the heels of robusta coffee’s strong performance, reaching a two-week high.
The surge in coffee prices began two weeks ago, spurred by concerns over Brazil’s coffee crop. Volcafe, a prominent coffee trader, recently revised its 2025/26 forecast for Brazil’s arabica production down to 34.4 million bags, a decrease of 11 million bags from earlier estimates. This follows a crop tour that revealed the severe impact of an extended drought in Brazil. Volcafe also projected a global arabica deficit of 8.5 million bags for 2025/26, compared to a 5.5 million bag deficit in 2024/25.
In addition to concerns over Brazil’s production, robusta coffee prices are being supported by a reduction in output from Vietnam, the world’s largest robusta producer. According to the Vietnam General Department of Customs, the country’s coffee exports in November plunged 47% year-on-year to 63,019 MT, and total exports from January-November fell 14% to 1.22 million MT. The recent rains in Vietnam flooded coffee fields, delaying the robusta harvest.
The adverse weather in both Brazil and Vietnam has pushed coffee prices higher as traders brace for tighter global supply. Some Brazilian coffee exporters have unwound their hedges, further driving up futures prices.
However, there is uncertainty about the extent of the crop damage in Brazil. While Volcafe forecasts a smaller crop, the Neuman Gruppe GmbH, another coffee trader, predicts that Brazil’s 2025/26 arabica crop could be closer to 40 million bags, higher than Volcafe’s estimate. It is still considered too early to assess the full impact of Brazil’s coffee crop damage.
On the supply side, arabica inventories monitored by ICE reached a two-and-a-half-year high last week, which could limit further price increases for arabica coffee in the near term.
Several factors are contributing to the current rally in coffee prices. The USDA’s Foreign Agricultural Service (FAS) recently projected Brazil’s coffee production for the 2024/25 season at 66.4 million bags, down from a previous forecast of 69.9 million bags. This revised estimate, along with reduced coffee inventories in Brazil, supports a bullish outlook for coffee prices. Additionally, Brazil’s crop forecasting agency Conab reduced its 2024 production forecast to 54.8 million bags, further fueling concerns about supply.
On the bearish side, global coffee supplies are showing signs of growth. The International Coffee Organization (ICO) reported a 15.1% year-on-year increase in global coffee exports for October 2024, and Brazil’s green coffee exports rose by 2.7% in November. Additionally, the ICO projects global coffee production for 2023/24 will rise 5.8% year-on-year, reaching a record 178 million bags, driven by a strong off-biennial crop year.
In contrast, global coffee consumption is also increasing, with ICO projecting a 2.2% rise to a record 177 million bags, which could help balance the market.
The USDA’s bi-annual report released in June was generally bearish for coffee prices, with projections showing an increase in global coffee production by 4.2% to 176.235 million bags in 2024/25. This includes a 4.4% increase in arabica production and a 3.9% rise in robusta production.
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