Supply Concerns Drive Coffee Prices to New Highs
Coffee prices surged sharply on Friday, continuing a two-day rally driven by concerns over tight future supplies. March arabica coffee rose by 5.34%, while January robusta climbed 5.27%.
Vietnam, the world’s largest robusta producer, reported a steep drop in coffee exports, with November exports plunging 49.1% year-on-year to 60,000 MT and January-November shipments down 14.3% to 1.2 MMT. Heavy rains and flooding delayed Vietnam’s coffee harvest, compounding supply concerns.
Arabica coffee prices reached a 47-year high last Friday, while robusta hit a 2-1/2-month high, as adverse weather in Brazil and Vietnam—two leading coffee producers—heightened fears of production shortfalls. Dry El Niño conditions earlier this year have significantly impacted coffee crops in South and Central America. Brazil, facing its driest weather since 1981, recorded below-average rainfall during the critical flowering stage, raising doubts about its 2025/26 arabica crop. Colombia, the second-largest arabica producer, is recovering slowly from drought conditions earlier this year.
Robusta production has also been hit hard. Vietnam’s 2023/24 crop year output fell 20%, marking a four-year low. The USDA projects Vietnam’s 2024/25 robusta production at 27.9 million bags, down slightly from 28 million bags in the previous season. Meanwhile, Brazil’s 2024/25 coffee production forecast was revised down to 66.4 MMT by the USDA, with inventories expected to decline 26% year-on-year.
Mixed signals about global supply continue to shape market dynamics. The International Coffee Organization (ICO) reported a 15.1% year-on-year increase in October global coffee exports, while total exports for the 2023/24 season rose 11.7% to 137.27 million bags. However, ICE-monitored inventories show tightness, with robusta inventories hitting a 7-1/2-month low.
Brazilian coffee exports present a bearish factor, with October green coffee exports up 11% year-on-year and the 2023/24 season seeing a record 33% increase. Additionally, the ICO projects a 2023/24 global coffee production surplus of 1 million bags due to a record output of 178 million bags against consumption of 177 million bags.
Despite bearish forecasts, the impact of weather disruptions and tight inventory levels continue to drive volatility in the coffee market, with prices likely to remain sensitive to evolving supply-demand dynamics.
