Coffee markets experienced significant fluctuations this week as diverse factors, particularly weather concerns in Brazil and shifting supply dynamics, acted upon prices. The mixed settlement observed on Tuesday saw July arabica coffee contracts closing up 0.70 cents at $0.37 per pound, while July ICE robusta coffee dipped sharply, losing 94 cents to settle at $4.69 per pound, marking a seven-week low.
Arabica coffee’s recent upward movement is primarily attributed to rising apprehensions regarding a reduction in crop yields due to adverse weather conditions in Brazil, the world’s largest arabica producer. According to Somar Meteorologia, Brazil’s major coffee-growing region, Minas Gerais, received a mere 0.3 millimeters of rain during the week ending May 24, translating to only 4% of its historical average for that period. This continued dry weather raises implications for future crop outputs and consequently affirms a potentially volatile market for coffee prices.
In the preceding weeks, coffee prices faced downward pressure amid concerns of an oversupply. Notably, arabica coffee prices declined to a six-week low last Friday, fueled by a forecast from the United States Department of Agriculture (USDA)’s Foreign Agricultural Service (FAS), which predicts a 0.5% increase in Brazil’s coffee production for the 2025/26 marketing year to 65 million bags, and a more significant projected rise of 6.9% year-over-year for Vietnam to reach 31 million bags.
The inventory situation further complicates the market landscape. The Intercontinental Exchange (ICE) reported that robusta coffee inventories surged to an eight-month high of 5,438 lots by last Friday, while arabica inventories increased to a record 892,468 bags—a high not seen in over three months. Such increases in stockpiles raise concerns about excess supply that could suppress prices further.
Adding to the bearish sentiment was another USDA report issued recently, which forecasted a 5.1% year-over-year increase in Honduras’ coffee production—the largest producer in Central America—projected to yield 5.8 million bags. Further, Brazilian consulting firm Safras & Mercado uplifted its production estimates for Brazil’s coffee to 65.51 million bags, slightly above previous predictions. Meanwhile, Brazil’s National Supply Company (Conab) also adjusted its coffee production estimate upwards to 55.7 million bags, up from 51.81 million as recorded in January.
Amidst these projections, the coffee market is simultaneously grappling with demand concerns that threaten to dampen prices. Multiple global commodity importers, including notable entities like Starbucks, Hershey, and Mondelez International, have expressed that the U.S.’s baseline 10% tariff on coffee imports would likely drive prices higher and adversely affect sales volumes. These apprehensions about consumer demand resonate throughout the coffee sector, raising questions about the overall sustainability of current price levels.
Contrasting the sales figures, reports from Cecafe indicated a sharp decrease in Brazil’s coffee export volumes for April, which plummeted by 28% year-on-year to 3.05 million bags. Supplying further support to prices, initial figures for the first four months of the year also showcase a 15.5% decline year-on-year, revealing total exports of 13.186 million bags. This decline signals potential tightening of demand and may bolster price resilience amid a landscape otherwise beset with bearish factors.
The robusta coffee segment has encountered its share of challenges as well. The drought in Vietnam is proving substantially detrimental to its coffee production, anticipated to drop by 20% for the 2023/24 crop year to 1.472 million metric tons, the lowest yield in four years. Concurrently, Vietnam’s own General Statistics Office has reported a notable 17.1% decline in coffee exports to a projected 1.35 million metric tons, with the National Statistics Office of Vietnam observing a 9.8% contraction for the 2025 January-April exports, dropping to 663,000 metric tons.
In a contrasting forecast, Rabobank has projected a 7.3% rise in Brazil’s robusta crop for the 2025/26 marketing year, potentially yielding a record 24.7 million bags. This speculative increase might offer a counterbalance to the already strained robusta market caused by reduced output from Vietnam.
Looking ahead, the USDA’s biannual report, released in December, painted a nuanced picture for coffee markets. The FAS estimated that global coffee production in the 2024/25 marketing year would increase by 4% year-over-year, reaching 174.855 million bags—a trend driven by a 1.5% rise in arabica production reaching 97.845 million bags and a significant 7.5% increase in robusta production anticipated at 77.01 million bags. Importantly, the report also indicated a forecasted decline in ending stocks to a 25-year low of 20.867 million bags, down from 22.347 million bags in the previous marketing year, raising potential signals for tightening supply.
Further adjustments from Volcafe indicate an updated assessment on Brazil’s arabica production, predicting a reduction to 34.4 million bags, down nearly 11 million bags from earlier estimates conducted in September. This revised outlook underscores the severity of the prolonged drought affecting Brazil’s coffee yields, presenting the possibility of a global arabica deficit of 8.5 million bags for the 2025/26 year—exceeding the 5.5 million bag deficit estimated for the preceding period and marking the fifth consecutive year of supply deficiencies.
As these dynamics unfold, the coffee market remains under scrutiny from investors and analysts alike. The interplay of fluctuating supply, weather patterns, and evolving demand signals will be critical in shaping future price trajectories. With the complexities surrounding both coffee types, the importance of adaptive strategies for traders and consumers alike has never been more consequential.
Understanding the implications of these developments is vital for stakeholders across the coffee supply chain, as they navigate the unpredictable terrain ahead while responding to a continuously evolving global market landscape.