On Tuesday, coffee prices took a hit, with July arabica coffee (KCN24) closing down -0.85 (-0.38%) and July ICE robusta coffee (RMN24) falling -40 (-0.94%). The dip saw arabica prices reach a two-week low and robusta prices a one-week low, influenced by Brazil’s accelerated coffee harvest.
Brazil’s 2024/25 coffee harvest, as reported by Safras & Mercado, is 29% completed as of June 4, surpassing last year’s 26% at the same time and the five-year average of 27%. This rapid pace is increasing coffee supplies, putting downward pressure on prices.
Adding to the pressure, the Brazilian real (^USDBRL) weakened to a 17-month low against the dollar on Monday, incentivizing export selling from Brazil’s coffee producers. Despite this, arabica coffee prices find some support due to the lack of rain in Brazil’s Minas Gerais region, which received no rainfall last week and is critical for about 30% of Brazil’s arabica production, according to Somar Meteorologia.
Globally, bearish export news is also influencing coffee prices. The International Coffee Organization (ICO) reported a 16.8% year-over-year increase in global coffee exports for April, amounting to 10.24 million bags. For the period from October to April, exports were up 11.1% year-over-year at 80.99 million bags. Additionally, Brazil’s green coffee exports surged by 61% year-over-year in April to 3.9 million bags, according to Cecafe.
ICE coffee inventories are rebounding from historically low levels, further pressuring prices. Robusta coffee inventories, which hit a record low of 1,958 lots on February 21, recovered to an 11-month high of 5,571 lots on Tuesday. Similarly, arabica coffee inventories, which fell to a 24-year low of 224,066 bags on November 30, recovered to a 15-month high of 799,038 bags last Friday.
Robusta coffee prices are supported by concerns over Vietnam’s coffee crop, which has been affected by excessive dryness. Volcafe, a coffee trader, reported that Vietnam’s 2024/25 robusta crop might be the lowest in 13 years at 24 million bags due to poor rainfall, causing “irreversible damage” to coffee blossoms. This year marks the fourth consecutive year of robusta bean deficits, with a projected deficit of 4.6 million bags for 2024/25.
Tight supplies from Vietnam, the world’s largest robusta producer, are a bullish factor. The country’s agriculture department projected a 20% drop in coffee production for the 2023/24 crop year due to drought. The Vietnam Coffee Association also anticipated a 20% year-over-year decline in coffee exports for 2023/24. Vietnam’s May coffee exports fell 47% year-over-year, the lowest for May since 2009, and Jan-May exports dropped 5.8% year-over-year. The USDA FAS projected a slight dip in Vietnam’s robusta production for 2024/25 to 27.9 million bags from 28 million bags in 2023/24.
The El Niño weather pattern has historically influenced coffee prices, bringing heavy rains to Brazil and drought to India, which negatively impacts coffee production. This year, El Niño has contributed to drought conditions in Vietnam’s coffee regions.
In contrast, the International Coffee Organization (ICO) projected a 5.8% year-over-year increase in global coffee production for 2023/24, reaching 178 million bags due to an exceptional off-biennial crop year. Global coffee consumption is expected to rise by 2.2% year-over-year to 177 million bags, resulting in a surplus of 1 million bags.
The USDA’s Foreign Agriculture Service (FAS) biannual report from December 21 projected a 4.2% year-over-year increase in world coffee production for 2023/24, totaling 171.4 million bags, with a 10.7% increase in arabica production to 97.3 million bags and a 3.3% decline in robusta production to 74.1 million bags. The USDA’s FAS also forecasts a 4% decrease in 2023/24 ending stocks to 26.5 million bags from 27.6 million bags in 2022-23. Brazil’s 2023/24 arabica production is expected to rise by 12.8% year-over-year to 44.9 million bags due to higher yields and increased acreage. Colombia, the world’s second-largest arabica producer, is projected to see a 7.5% year-over-year increase in 2023/24 coffee production, reaching 11.5 million bags.
These dynamics in coffee production, exports, and weather patterns continue to shape the global coffee market, influencing prices and supply chains.