May arabica coffee (KCK25) dropped 5.49% today, falling by 22.50 points, while May ICE robusta coffee (RMK25) declined 3.44%, down 194 points. The drop was triggered by forecasts of rainfall in Brazil, which led to long liquidation in coffee futures.
Meteorological service Somar Meteorologia reported that while hot and dry weather will persist in Brazil for the rest of the week, the country is expected to receive several days of showers next week, helping to relieve dry conditions.
Vietnam’s Rising Coffee Exports Add to Pressure
Vietnam, the world’s largest robusta producer, also contributed to downward price pressure. The General Statistics Office of Vietnam reported that February coffee exports rose 6.6% year-over-year to 169,000 metric tons (MT).
Additionally, weather forecasts indicate rain every day next week in Vietnam’s Central Highlands, the nation’s top coffee-growing region. This improved outlook further weighed on coffee prices.
Brazil’s Key Arabica Region Receives Below-Average Rainfall
Last Monday, Somar Meteorologia reported that Minas Gerais, Brazil’s largest arabica-producing state, received only 11.4 mm of rain in the week ending February 22, just 24% of the historical average.
The delayed rainfall report was due to the Brazilian Carnival holiday, but the ongoing drought conditions continue to impact the coffee industry.
Shrinking Coffee Inventories Provide Some Support
Despite price declines, shrinking coffee inventories have offered some support.
Robusta inventories tracked by ICE fell to a two-month low of 4,247 lots last Friday.
Arabica inventories reached a 9.25-month low of 758,514 bags on February 18, though they rebounded to a two-week high of 809,128 bags last Thursday.
Brazil’s Fast Coffee Sales Limit Future Supply
Brazil’s coffee producers have already sold a higher-than-usual percentage of their harvest, reducing the available supply.
Safras & Mercado reported that 88% of Brazil’s 2024/25 coffee harvest was sold by February 11, compared to 79% last year and the five-year average of 82%.
Sales of the 2025/26 crop remain slow, with only 13% sold, far below the four-year average of 22%.
This reluctance to sell signals potential supply shortages in the future.
Brazil’s Green Coffee Exports Decline
Concerns over coffee supply continue to support prices, despite today’s decline.
Cecafe reported that Brazil’s January green coffee exports fell 1.6% year-over-year to 3.98 million bags.
Brazil’s 2025/26 coffee crop is forecast to decline by 4.4% to a three-year low of 51.81 million bags, according to Conab.
Conab also reduced its 2024 coffee production estimate from 54.8 million bags to 54.2 million bags, citing weather-related damage.
El Niño’s Long-Term Impact on Coffee Crops
The El Niño weather pattern continues to impact coffee production across South and Central America.
Brazil has experienced below-average rainfall since April 2023, affecting the critical flowering stage of coffee trees.
The country is facing its driest conditions since 1981, according to Cemaden, Brazil’s natural disaster monitoring center.
Colombia, the world’s second-largest arabica producer, is still recovering from drought conditions caused by El Niño last year.
Robusta Prices Supported by Declining Vietnamese Production
Despite today’s decline, robusta coffee prices remain supported by reduced output in Vietnam.
Vietnam’s 2023/24 coffee production fell 20% to 1.472 million MT, the smallest crop in four years due to drought.
The USDA Foreign Agriculture Service (FAS) projected that Vietnam’s robusta production in 2024/25 will dip slightly to 27.9 million bags, down from 28 million bags the previous year.
Vietnam’s 2024 coffee exports have also fallen 17.1% year-over-year to 1.35 million MT, according to the General Statistics Office.
However, the Vietnam Coffee and Cocoa Association recently raised its 2024/25 production estimate to 28 million bags, up from 27 million bags in October.
Global Coffee Exports Paint a Mixed Picture
Conab reported that Brazil’s 2024 coffee exports increased by 28.8% to a record 50.5 million bags.
In contrast, the International Coffee Organization (ICO) noted that global coffee exports fell 12.4% in December and 0.8% between October and December.
USDA’s Biannual Coffee Report Offers Mixed Signals
The USDA’s December 18 report presented a mixed outlook for the coffee market.
Global coffee production in 2024/25 is expected to increase 4.0% to 174.855 million bags.
Arabica production is projected to rise 1.5% to 97.845 million bags, while robusta production is expected to grow 7.5% to 77.01 million bags.
Global ending stocks for 2024/25 are forecast to fall 6.6% to a 25-year low of 20.867 million bags.
Additionally, the USDA revised Brazil’s 2024/25 coffee production forecast downward to 66.4 MMT, lower than the earlier 69.9 MMT estimate.
Future Projections: Continued Deficits in Arabica Coffee
Looking ahead to the 2025/26 marketing year, industry experts expect supply constraints to persist.
Volcafe revised its Brazil arabica coffee production estimate to 34.4 million bags, down by 11 million bags from its September forecast.
The company also projected a global arabica coffee deficit of 8.5 million bags, exceeding the 5.5 million bag deficit in 2024/25.
If these projections hold, 2025/26 will mark the fifth consecutive year of arabica coffee shortages.
Conclusion
Coffee prices fell sharply today as forecasts for rain in Brazil and Vietnam improved supply prospects, prompting long liquidation in coffee futures. However, supply concerns persist, with shrinking inventories, slower sales of future crops, and long-term drought damage affecting production. While global exports have risen, the uncertain outlook for future supply may continue to drive volatility in the coffee market.
Related topics:
