Coffee Prices Decline as Weather Conditions Improve in Key Regions
Global coffee prices experienced notable declines as favorable weather conditions eased supply concerns. On Friday, March arabica coffee contracts closed down 2.51%, while robusta coffee contracts dropped 1.74%.
Rainfall Brings Relief in Brazil
Brazil’s key arabica coffee-growing region, Minas Gerais, recently received 102.8 mm of rain, amounting to 182% of the historical average, according to Somar Meteorologia. This above-average rainfall alleviated fears of prolonged drought, which had previously driven coffee prices higher.
Earlier in December, the consultancy Volcafe projected a significant reduction in Brazil’s arabica output for the 2025/26 season, forecasting a 34.4 million bag harvest, 11 million bags lower than its earlier estimate due to drought. However, the recent rainfall provides much-needed hope for improved crop conditions.
Vietnam’s Robusta Harvest Faces Delays
In contrast, Vietnam, the world’s largest robusta producer, is grappling with heavy rains that have disrupted its coffee harvest. Flooded fields and ongoing downpours have delayed the process, following a 47% year-over-year plunge in November exports. The Vietnam General Department of Customs reported year-to-date exports down 14% at 1.22 million metric tons. Despite these challenges, robusta prices had risen earlier in the week, reflecting concerns over supply constraints.
Rising Coffee Inventories Add Pressure
Increased global coffee inventories have added downward pressure on prices. ICE-monitored arabica stocks rose to a 2.5-year high of 991,080 bags, while robusta inventories hit a 2.5-month high. Additionally, a weaker Brazilian real incentivized export activity, further contributing to bearish market sentiment.
Mixed Global Coffee Production Outlook
The USDA’s December report projected a 4% increase in global coffee production for 2024/25, reaching 174.855 million bags. This includes a 1.5% rise in arabica production and a 7.5% uptick in robusta output. Despite these gains, ending stocks are expected to fall by 6.6% to a 24-year low of 20.867 million bags, reflecting robust consumption growth. The International Coffee Organization (ICO) also noted a 2023/24 coffee production increase of 5.8%, creating a modest surplus of 1 million bags.
Long-Term Concerns Persist
While recent rains have alleviated immediate drought concerns, the long-term impact of El Niño weather patterns remains a concern. Brazil, experiencing its driest conditions since 1981, has seen coffee trees damaged during the flowering stage. Similarly, Colombia is recovering from earlier drought impacts on its arabica production.
In Vietnam, robusta production for the 2023/24 season declined 20%, marking the smallest crop in four years. Projections for the upcoming season remain mixed, with estimates ranging from 27.9 to 28 million bags.
Export Trends Highlight Bearish Signals
Global coffee exports surged by 15.1% in October, the ICO reported, with Brazil’s exports alone climbing 33% year-over-year to a record 47.3 million bags. This increase in supply has contributed to bearish sentiment in the market, despite localized weather challenges in major coffee-producing regions.
The interplay of improved weather conditions in Brazil, disruptions in Vietnam, and growing inventories continues to shape the global coffee market. Traders and stakeholders will closely monitor developments in the coming months as supply-demand dynamics evolve.
