March arabica coffee (KCH25) Monday closed up +7.90 (+2.47%), and January ICE robusta coffee (RMF25) closed up +21 (+0.40%).
Coffee prices Monday posted moderate gains on below-average rainfall in Brazil, which may reduce the country's coffee output. Somar Meteorologia reported Monday that rainfall in Brazil's biggest arabica coffee growing area of Minas Gerais received 35.2 mm of rain last week, or only 65% of the historical average. Minas Gerais is Brazil's largest arabica coffee-producing area.
Robusta coffee also has support on signs of tighter supplies after ICE-monitored robusta coffee inventories Monday fell to a 7-1/2 month low of 3,672 lots.
Coffee prices have rallied sharply over the past two weeks based on the outlook for a smaller Brazilian coffee crop. Last Tuesday, Mar arabica posted a contract high, and the Dec coffee nearest-futures contract (Z24) posted a record high. Also, robusta coffee rose to a 2-week high. The outlook for a smaller coffee crop in Brazil sent prices soaring after Volcafe on Tuesday 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 also 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 are soaring as adverse weather in Brazil and Vietnam, the world's two biggest coffee growers, threatens global coffee production. According to Sucden Financial, the price surge has also prompted some of Brazil's coffee exporters to unwind their hedges and buy coffee futures to cover short positions, pushing coffee prices even higher.
Robusta coffee has support on smaller supplies from Vietnam when the Vietnam General Department of Customs last Wednesday reported that Vietnam Nov coffee exports plunged -47 % y/y to 63,019 MT, and Jan-Nov coffee exports are down -14% y/y at 1.22 MMT. Recent rain in Vietnam flooded coffee fields and delayed the robusta coffee harvest. Vietnam, the world’s biggest robusta producer, is at the start of its coffee harvest.
The impact of dry El Nino weather earlier this year may lead to longer-term coffee crop damage in South and Central America. Rainfall in Brazil has consistently been below average since 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 earlier this year.
A bearish factor for arabica coffee is an increase in current supplies after ICE-monitored arabica coffee inventories last Friday climbed to a 2-1/2 year high of 940,426 bags.
Uncertainty regarding Brazil's coffee crop damage may limit further upside in coffee prices after coffee trader Neuman Gruppe GmbH said last Wednesday that Brazil's 2025/26 arabica crop is likely to be toward 40 million bags, well above last Tuesday's forecast from Volcafe of 34.4 million bags, and said it's still "too early" to assess the 2025/26 Brazil coffee crop accurately.
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. 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.
Coffee prices also have carryover support from November 22 when the USDA's Foreign Agricultural Service (FAS) 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 also projects Brazil's coffee inventories at 1.2 million bags at the end of the 2024/25 season in June, down -26% y/y.
In a supportive factor for coffee prices, Conab, Brazil's crop forecasting agency, cut its 2024 Brazil coffee production forecast on September 19 to 54.8 million bags from May's forecast of 58.8 million bags.
Signs of larger global coffee supplies are 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.
Brazilian coffee export news has been bearish. Cecafe reported last Monday that Brazil's green coffee exports rose +2.7% y/y to 4.29 million bags. Also, Brazil's 2023/24 coffee exports rose +33% y/y to a record 47.3 million bags.
In a bearish factor, the International Coffee Organization (ICO) recently projected that 2023/24 global coffee production would climb +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 would climb +2.2% y/y to a record 177 million bags, resulting in a 1 million bag coffee surplus.
The USDA's bi-annual report on June 20 was bearish for coffee prices. The USDA's Foreign Agriculture Service (FAS) projected that world coffee production in 2024/25 will increase +4.2% y/y to 176.235 million bags, with a +4.4% increase in arabica production to 99.855 million bags and a +3.9% increase in robusta production to 76.38 million bags. The USDA's FAS forecasts that 2024/25 ending stocks will climb by +7.7% to 25.78 million bags from 23.93 million bags in 2023/24.
