Coffee prices experienced a notable rebound on Friday, with robusta coffee reaching an unprecedented peak. This increase follows a 2.5-year high for arabica coffee futures earlier in the week. The surge in robusta prices is largely attributed to adverse weather conditions affecting coffee crops in both Brazil and Vietnam.
On Wednesday, Rural Clima highlighted potential frost risks in Brazil’s coffee-growing regions due to a forecast for low temperatures this weekend. Such conditions could severely damage coffee trees. Moreover, prolonged dryness in Brazil is causing premature flowering in coffee trees, which is expected to reduce the yield of the 2024/25 coffee crop. Cooxupe, Brazil’s largest coffee cooperative, reported that many coffee-growing areas have experienced minimal rainfall over the past 120 days. Somar Meteorologia further noted that Brazil’s Minas Gerais region, which contributes about 30% of Brazil’s arabica crop, received no rain last week.
Vietnam, the world’s leading robusta coffee producer, is also facing production challenges. The General Department of Vietnam Customs reported a significant drop in coffee exports for July, down 29.3% year-over-year to 76,982 metric tons. Additionally, coffee exports from January to July are down 12.4% year-over-year, totaling 979,353 metric tons. The reduced exports are contributing to higher robusta coffee prices as fears of crop damage from excessive dryness persist.
Volcafe, a major coffee trader, projected that Vietnam’s 2024/25 robusta coffee crop could fall to 24 million bags, the lowest in 13 years. This decline is attributed to “irreversible damage” caused by poor rainfall. Volcafe also forecasts a global robusta deficit of 4.6 million bags for 2024/25, marking the fourth consecutive year of shortages.
Vietnam’s agriculture department anticipates a 20% decrease in coffee production for the 2023/24 crop year, resulting in the smallest crop in four years. The Vietnam Coffee Association also predicts a 20% drop in coffee exports for the same period. The USDA’s Foreign Agriculture Service (FAS) projects a slight decrease in Vietnam’s robusta coffee production for the 2024/25 marketing year, from 28 million bags to 27.9 million bags.
Conversely, robust coffee exports from Brazil are placing downward pressure on arabica coffee prices. The Brazilian Trade Ministry reported a 44% increase in coffee exports for July, reaching 202,000 metric tons. Additionally, Cecafe reported a record 47.3 million bags of coffee exports for the 2023/24 season. The International Coffee Organization (ICO) also noted a rise in global coffee exports, with June’s exports up 3.8% year-over-year to 10.78 million bags, and October to June exports increasing 10.1% to 103.47 million bags.
The recent rebound in ICE coffee inventories is another bearish factor for prices. ICE-monitored arabica coffee inventories rose to a 1.5-year high of 843,110 bags, up from a 24-year low of 224,066 bags recorded in November 2023. Similarly, ICE-monitored robusta coffee inventories increased to a one-year high of 6,521 lots as of July 25, up from a record low of 1,958 lots in February 2024.
Despite these factors, the ICO reported on May 3 that global coffee production for 2023/24 increased by 5.8% year-over-year to 178 million bags. Global consumption rose by 2.2% to 177 million bags, resulting in a 1 million bag surplus. The USDA’s bi-annual report on June 20 further indicated a projected 4.2% increase in world coffee production for 2024/25, reaching 176.235 million bags. This includes a 4.4% increase in arabica production and a 3.9% increase in robusta production. The USDA also forecasts a 7.7% rise in ending stocks to 25.78 million bags, with Brazil’s arabica production expected to climb by 7.3% and Colombia’s production by 1.6%.