March arabica coffee (KCH25) Tuesday closed down -0.55 (-0.17%), and March ICE robusta coffee (RMH25) closed up +120 (+2.33%).
Coffee prices Tuesday settled mixed, with robusta posting a 6-week high. Robusta coffee moved higher on concerns that supplies from Vietnam, the world's largest robusta producer, will shrink as the country prepares for the Lunar New Year holiday later this month, which typically disrupts bean supply.
Arabica coffee fell from a 1-month high Tuesday and closed slightly lower on the outlook for adequate coffee supplies. Last Wednesday, Cecafe reported that Brazil's 2024 arabica coffee exports jumped +20% y/y to a record 37 million bags, and 2024 Brazil robusta coffee exports surged +98% y/y to a record 9.4 million bags.
An increase in inventories is also bearish for coffee prices after ICE-monitored arabica coffee inventories rose to a 2-1/2 year high of 993,562 bags on January 6. Also, ICE-monitored robusta coffee inventories rose to a 3-1/2 month high Tuesday of 4,506 lots.
A bullish factor for coffee was Tuesday's action by Conab, Brazil's government crop forecasting agency, to cut its 2024 Brazil coffee crop estimate by -1.1% to 54.2 million bags from a September estimate of 54.8 million bags.
Arabica coffee also has support from below-normal rainfall in Brazil after Somar Meteorologia reported Monday that Brazil's biggest arabica coffee growing area of Minas Gerais received 29.6 mm of rain last week, or only 53% of the historical average.
Coffee prices rallied sharply last month due to the outlook for a smaller Brazilian coffee crop. March arabica posted a contract high, and the Dec coffee nearest-futures contract (Z24) posted a record high. The outlook for a smaller coffee crop in Brazil sent prices soaring after Volcafe on December 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.
Coffee prices saw support after consultancy group Safras & Mercado on December 20 estimated the 2025/26 Brazilian coffee crop at 62.45 million bags, down -5% yr/yr. Safras predicts that arabica output will fall -15% yr/yr to 38.35 million bags due to drought and that robusta production will be 24.1 million bags.
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 last Friday 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.
News of larger global coffee exports is bearish for prices. On December 5, the International Coffee Organization (ICO) reported that Oct global coffee exports for the beginning of the 2024/25 season rose +15.1% y/y to 11.13 mln bags. Global coffee exports for 2023/24 (Oct-Sep) rose +11.7% y/y to 137.27 mln bags. Also, Brazilian coffee export news has been bearish. Cecafe reported Wednesday that Brazil's 2024 coffee exports rose +30.2% y/y to a record 46.3 million bags.
