May arabica coffee (KCK25) today is up +2.90 (+0.75%), and May ICE robusta coffee (RMK25) is up +88 (+1.64%).
Coffee prices today are trading higher on below-normal rainfall in Brazil. Somar Meteorologia reported today that Brazil's biggest arabica coffee growing area of Minas Gerais received 1.1 mm the week ended March 8, or 2% of the historical average.
Coffee prices were undercut when Marex Solutions last Friday said they expect the global coffee surplus in the 2025/26 season to widen to 1.2 million bags from +200,000 bags in the 2024/25 season.
A bearish factor for robusta coffee was last Thursday's report from Vietnam's General Statistics Office that showed Vietnam's Feb coffee exports rose +6.6% y/y to 169,000 MT. Vietnam is the world's number one producer of robusta coffee beans.
A rebound in coffee inventories is bearish for coffee prices after ICE-monitored robusta coffee inventories rose to a 1-month high last Friday of 4,356 lots. Meanwhile, ICE-monitored arabica coffee inventories slid to a 9-1/4 month low on February 18 at 758,514 bags, although they have since recovered to a 3-week high of 809,128 bags on February 27.
Continued supply fears have supported coffee prices. Cecafe reported on February 12 that Brazil's January green coffee exports fell -1.6% y/y to 3.98 million bags. Also, on January 28, Conab, Brazil's government crop forecasting agency, forecasted that Brazil's 2025/26 coffee crop would fall -4.4% y/y to a 3-year low of 51.81 million bags. Conab also cut its 2024 Brazil coffee crop estimate by -1.1% to 54.2 million bags from a September estimate of 54.8 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 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.
News of larger global coffee exports is bearish for prices. Conab reported on February 4 that Brazil's 2024 coffee exports rose +28.8% y/y to a record 50.5 million bags. However, ICO reported on February 6 that Dec global coffee exports fell -12.4% y/y to 10.73 million bags, and Oct-Dec global coffee exports fell -0.8% y/y to 32.25 million bags.
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 its 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 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.
