Coffee lovers, brace yourselves! The caffeine landscape is shifting dramatically, marked by unprecedented arabica prices and fluctuating robusta trends. Dive into the latest insights and forecasts that could impact your morning brew.
As of Friday’s close, March arabica coffee (KCH25) surged by +4.45 to reach an impressive +1.19%, while March ICE robusta coffee (RMH25) saw a slight decline, hitting -16 (-0.28%). This mixed market performance hints at bigger trends affecting coffee prices globally, especially with arabica reaching an all-time near futures high.
Global Supply Concerns
One of the primary drivers behind the rising arabica prices is the alarming forecast from Conab, Brazil’s government crop forecasting agency. The recent report projected that Brazil’s coffee crop for 2025/26 would drop by 4.4% year-on-year, impacting the supply chain with an expected yield of just 51.81 million bags—marking a three-year low. Moreover, Conab has revised its 2024 estimates down to 54.2 million bags from 54.8 million, exacerbating fears of a dwindling coffee supply.
Climate Impact on Crop Yields
Compounding these supply concerns, unfavorable weather conditions in Brazil have taken a toll on coffee production. The forecast by Somar Meteorologia revealed that the key arabica-growing region of Minas Gerais received a mere 53% of its typical rainfall last week, totaling just 26.5 mm. This decline in precipitation is part of a worrying trend; since April of last year, rainfall has been consistently below average, undermining essential flowering stages and posing threats to the upcoming crop.
The ongoing effects of El Niño have further strained coffee crops in South and Central America. This past year, Brazil has endured its driest weather since 1981, as reported by Cemaden, raising significant concerns about the health of coffee trees. Additionally, Colombia is starting to recover from its own El Niño-induced drought, but progress is slow.
Fund Buying and Market Reactions
In the backdrop of these challenges, global coffee supply concerns have led to increased fund buying, thereby supporting Coffee prices. As of December 17, Volcafe’s projection for Brazil’s 2025/26 arabica crop was reduced to 34.4 million bags, a staggering 11 million bags lower than previous estimates due to the impact of drought. This has contributed to a projected global deficit of -8.5 million bags for arabica coffee in 2025/26—a significant increase from the earlier -5.5 million bag deficit for 2024/25. Notably, this marks the fifth consecutive year of deficits.
Robusta Market Dynamics
On the other hand, robusta coffee prices are seeing support from declining production figures. Vietnam, the world’s largest producer of robusta coffee, reported a dramatic -20% drop in production for the 2023/24 crop year, resulting in the smallest crop in four years, at 1.472 MMT. This downward trend is also echoed in the USDA FAS’s projections, which predict a slight decrease in Vietnam’s robusta production for the upcoming 2024/25 marketing year to 27.9 million bags. Alongside this, Vietnam’s coffee exports dipped by -17.1% year-on-year to 1.35 MMT.
Nonetheless, there’s a silver lining on the horizon, as the Vietnam Coffee and Cocoa Association recently increased its 2024/25 coffee production estimate to 28 million bags, signaling potential recovery in the robusta sector.
The coffee market is navigating uncertain waters, shaped by climatic challenges and changing production forecasts. With arabica prices on the rise due to supply constraints and robusta pricing under pressure from reduced outputs, both consumers and industry players must stay informed to make savvy coffee-related decisions.
Will your coffee choice be impacted by these market shifts? Share your thoughts below!
by Greg Berkowitz – Berk’s Beans Coffee
