March arabica coffee (KCH25) today is up +8.20 (+2.24%), and March ICE robusta coffee (RMH25) is up +104 (+1.85%).
Coffee prices today extended this week's rally, with arabica soaring to a new all-time nearest-futures high and robusta posting a 2-month high. Concerns of tight global coffee supplies are underpinning prices after Conab, Brazil's government crop forecasting agency, forecasted Tuesday that Brazil's 2025/26 coffee crop will fall -4.4% y/y to a 3-year low of 51.81 million bags. Last Tuesday, Conab 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 26.5 mm of rain last week, or only 53% 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.
Lingering global coffee supply concerns are supporting prices and fueling fund buying of coffee. On December 17, Volcafe 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.
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 7-week low of 902,995 bags Wednesday.
News of larger global coffee exports is bearish for prices. On 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.
