On Wednesday, coffee prices surged sharply, with March arabica coffee (KCH25) closing up by 4.44%, and March ICE robusta coffee (RMH25) gaining 2.90%. This price rally follows a tightening of coffee supplies, particularly from Brazil, which has led to concerns about the global coffee supply.
Smaller Exports and Weather Impact in Brazil
Brazil, the world’s largest arabica coffee producer, has seen a decline in coffee exports. According to Cecafe, Brazil’s January green coffee exports fell 1.6% year-on-year, totaling 3.98 million bags. Additionally, below-average rainfall in Brazil has raised concerns about the coffee crop. Somar Meteorologia reported that Minas Gerais, Brazil’s largest arabica-growing region, received only 85% of its typical rainfall last week.
These factors have created a bullish sentiment for coffee prices, especially after Brazil’s government crop forecasting agency, Conab, projected a decline in the 2025/26 coffee crop by 4.4%. The 2024 forecast for Brazil’s coffee crop was also lowered by 1.1%.
Impact of El Niño on Coffee Crops
The ongoing effects of the El Niño weather pattern are further exacerbating concerns. Brazil has been experiencing its driest weather since 1981, leading to damage to coffee trees, especially during the critical flowering stage. Similarly, Colombia, the world’s second-largest arabica producer, continues to recover from the drought caused by El Niño.
Reduced Robusta Coffee Production
Robusta coffee prices have also risen due to reduced production. Vietnam, the world’s largest producer of robusta coffee, faced a 20% drop in production in the 2023/24 season due to drought. The USDA projects Vietnam’s robusta coffee production to dip slightly to 27.9 million bags in 2024/25, down from 28 million in 2023/24. Additionally, Vietnam’s coffee exports fell 17.1% year-on-year in 2024, further tightening the global coffee supply.
Falling Coffee Inventories
Despite a brief increase in inventories, coffee supplies are again on the decline. Robusta coffee inventories rose to a four-month high in late January but have since fallen to a five-week low. Similarly, arabica coffee inventories, which had reached a two-and-a-half-year high in January, have dropped to their lowest point in three and a half months.
Record Global Exports Add Downward Pressure
While global coffee exports increased, the news has had a bearish effect on prices. Brazil’s coffee exports in 2024 reached a record 50.5 million bags, an increase of 28.8% year-on-year. Vietnam also reported a rise in coffee exports in January, up 6.3% from the previous month. However, the International Coffee Organization (ICO) noted that global coffee exports in December fell 12.4% year-on-year.
Mixed Forecasts for Global Coffee Production
The USDA’s biannual report provides a mixed outlook for coffee prices. It forecasts a 4% increase in global coffee production in 2024/25, with arabica production rising by 1.5% and robusta production up by 7.5%. However, it also predicts that ending stocks will fall by 6.6%, reaching a 25-year low. Additionally, Brazil’s coffee production forecast for 2024/25 has been revised down to 66.4 million bags, below previous projections.
Future Deficits in Arabica Coffee
In the long term, global arabica coffee production is expected to face deficits. Volcafe recently revised its forecast for Brazil’s 2025/26 arabica crop, cutting it to 34.4 million bags due to prolonged drought conditions. Volcafe predicts a global arabica deficit of 8.5 million bags in 2025/26, a sharp increase from the previous year’s projected deficit of 5.5 million bags.
Conclusion
As global coffee supplies tighten due to unfavorable weather conditions, reduced production, and lower exports, coffee prices are expected to remain high. The ongoing challenges faced by major coffee-producing countries, particularly Brazil and Vietnam, have heightened concerns about future coffee shortages, further supporting rising prices.
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