March arabica coffee (KCH25) Monday closed up +3.05 (+0.81%), and March ICE robusta coffee (RMH25) closed down -184 (-3.22%).
Coffee prices Monday settled mixed, with arabica soaring to a new all-time nearest-futures high. Global coffee supply fears are underpinning prices after Conab, Brazil's government crop forecasting agency, forecasted last Tuesday that Brazil's 2025/26 coffee crop would fall -4.4% y/y to a 3-year low of 51.81 million bags. Also, Conab last Tuesday cut its 2024 Brazil coffee crop estimate by -1.1% to 54.2 million bags from a September estimate of 54.8 million bags.
Coffee prices gave up some of their gains Monday, with robusta falling sharply into negative territory, after a rally in the dollar index (DXY00) to a 3-week high sparked long liquidation in coffee futures. Robusta coffee also came under pressure Monday after exporter Comexim Ltda. said it expects Brazil's 2025/26 robusta coffee production to jump by +24.6% to 23.3 million bags.
Another bearish factor for coffee is above-normal rainfall in Brazil that eased dryness concerns after Somar Meteorologia reported today that Brazil's biggest arabica coffee growing area of Minas Gerais received 119 mm of rain last week, or 203% of the historical average.
The impact of dry El Nino weather last year may lead to longer-term coffee crop damage in South and Central America. Rainfall in Brazil has consistently been below average since last April, damaging coffee trees during the all-important flowering stage and reducing the prospects for Brazil's 2025/26 arabica coffee crop. Brazil has been facing the driest weather since 1981, according to the natural disaster monitoring center Cemaden. Also, Colombia, the world's second-largest arabica producer, is slowly recovering from the El Nino-spurred drought last year.
Robusta coffee prices are underpinned by reduced robusta production. Due to drought, Vietnam's coffee production in the 2023/24 crop year dropped by -20% to 1.472 MMT, the smallest crop in four years. The USDA FAS on May 31 projected that Vietnam's robusta coffee production in the new marketing year of 2024/25 will dip slightly to 27.9 million bags from 28 million bags in the 2023/24 season. In addition, Vietnam's General Statistics Office reported on January 10 that 2024 Vietnam coffee exports fell -17.1% y/y to 1.35 MMT. Conversely, the Vietnam Coffee and Cocoa Association on December 3 raised its 2024/25 Vietnam coffee production estimate to 28 million bags from an October estimate of 27 million bags.
An increase in robusta coffee inventories is bearish for prices after ICE-monitored robusta coffee inventories rose to a 3-3/4 month high last Friday of 4,603 lots. Meanwhile, ICE-monitored arabica coffee inventories rose to a 2-1/2 year high of 993,562 bags on January 6 but have since fallen back and dropped to a 2-1/2 month low of 856,177 bags Monday.
News of larger global coffee exports is bearish for prices. Last Tuesday, Conab reported that Brazil's 2024 coffee exports rose +28.8% y/y to a record 50.5 million bags.
In a bearish factor, the International Coffee Organization (ICO) recently said that 2023/24 global coffee production climbed +5.8% y/y to a record 178 million bags due to an exceptional off-biennial crop year. ICO also said global 2023/24 coffee consumption rose +2.2% y/y to a record 177 million bags, resulting in a 1 million bag coffee surplus.
The USDA's biannual report on December 18 was mixed for coffee prices. The USDA's Foreign Agriculture Service (FAS) projected that world coffee production in 2024/25 will increase +4.0% y/y to 174.855 million bags, with a +1.5% increase in arabica production to 97.845 million bags and a +7.5% increase in robusta production to 77.01 million bags. The USDA's FAS forecasts that 2024/25 ending stocks will fall by -6.6% to a 25-year low of 20.867 million bags from 22.347 million bags in 2023/24. Separately, the USDA's FAS on November 22 projected Brazil's 2024/25 coffee production at 66.4 MMT, below the USDA's previous forecast of 69.9 MMT. The USDA's FAS projects Brazil's coffee inventories at 1.2 million bags at the end of the 2024/25 season in June, down -26% y/y.
For the 2025/26 marketing year, Volcafe on Dec 17 cut its 2025/26 Brazil arabica coffee production estimate to 34.4 million bags, down by about 11 million bags from a September estimate after a crop tour revealed the severity of an extended drought in Brazil. Volcafe projects a global 2025/26 arabica coffee deficit of -8.5 million bags, wider than the -5.5 million bag deficit for 2024/25 and the fifth consecutive year of deficits.
