Coffee prices saw moderate losses on Tuesday after a sharp drop in the Brazilian real, which hit a record low against the dollar. This triggered long liquidation in coffee futures, as the weaker real encourages Brazilian coffee producers to increase exports, boosting supplies.
A bearish factor for arabica coffee is the rise in current inventories, with ICE-monitored arabica coffee stocks reaching a 2-and-a-half-year high of 949,231 bags on Tuesday.
Over the past two weeks, coffee prices had surged sharply, driven by concerns about a smaller coffee crop in Brazil. Last Tuesday, the March arabica contract hit a new high, and the December coffee nearest-futures contract (Z24) set a record. Robusta coffee also rose to a two-week high. The price spike followed Volcafe’s reduction of its 2025/26 Brazil arabica coffee production estimate to 34.4 million bags, a drop of about 11 million bags from September’s forecast. A crop tour revealed the extent of the ongoing drought in Brazil. Volcafe also projected a global arabica coffee deficit of 8.5 million bags for the 2025/26 season, wider than the 5.5 million bag deficit for 2024/25, marking the fifth consecutive year of deficits.
The price surge has been further fueled by adverse weather conditions in both Brazil and Vietnam, the world’s two largest coffee producers, threatening global coffee supplies. Sucden Financial reported that the price hike has led some Brazilian exporters to unwind their hedges and buy coffee futures to cover short positions, further driving prices higher.
Related topics:
- Droughts Hit Brazil and Vietnam, Driving Coffee Prices Up
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- Vietnam’s Coffee Prices Reach Record Highs in 2024