March arabica coffee (KCH25) Friday closed up +3.60 (+1.05%), and March ICE robusta coffee (RMH25) closed up +62 (+1.13%).
Coffee prices on Friday added to this week’s sharp rally, with arabica posting a new record nearest-futures high and robusta posting a 6-week high. Lingering global coffee supply concerns are supporting prices and fueling fund buying of coffee. On December 17, Volcafe cut its 2025/26 Brazil arabica coffee production estimate to 34.4 million bags, down by about 11 million bags from a September estimate after a crop tour revealed the severity of an extended drought in Brazil. Volcafe projects a global 2025/26 arabica coffee deficit of -8.5 million bags, wider than the -5.5 million bag deficit for 2024/25 and the fifth consecutive year of deficits.
Strength in the Brazilian real (^USDBRL) also supports coffee prices after the real rallied to a 1-3/4 month high Friday against the dollar. The stronger real discourages export selling from Brazil’s coffee producers,
A bullish factor for coffee was Tuesday’s action by Conab, Brazil’s government crop forecasting agency, to cut its 2024 Brazil coffee crop estimate by -1.1% to 54.2 million bags from a September estimate of 54.8 million bags.
Arabica coffee also has support from below-normal rainfall in Brazil after Somar Meteorologia reported Monday that Brazil’s biggest arabica coffee growing area of Minas Gerais received 29.6 mm of rain last week, or only 53% of the historical average.
Coffee prices saw support after consultancy group Safras & Mercado on December 20 estimated the 2025/26 Brazilian coffee crop at 62.45 million bags, down -5% yr/yr. Safras predicts that arabica output will fall by 15% yr/yr to 38.35 million bags due to drought and that robusta production will be 24.1 million bags.
The impact of dry El Nino weather last year may lead to longer-term coffee crop damage in South and Central America. Rainfall in Brazil has consistently been below average since last April, damaging coffee trees during the all-important flowering stage and reducing the prospects for Brazil’s 2025/26 arabica coffee crop. Brazil has been facing the driest weather since 1981, according to the natural disaster monitoring center Cemaden. Also, Colombia, the world’s second-largest arabica producer, is slowly recovering from the El Nino-spurred drought last year.
Robusta coffee prices are underpinned by reduced robusta production. Due to drought, Vietnam’s coffee production in the 2023/24 crop year dropped by -20% to 1.472 MMT, the smallest crop in four years. The USDA FAS on May 31 projected that Vietnam’s robusta coffee production in the new marketing year of 2024/25 will dip slightly to 27.9 million bags from 28 million bags in the 2023/24 season. In addition, Vietnam’s General Statistics Office reported last Friday that 2024 Vietnam coffee exports fell -17.1% y/y to 1.35 MMT. Conversely, the Vietnam Coffee and Cocoa Association on December 3 raised its 2024/25 Vietnam coffee production estimate to 28 million bags from an October estimate of 27 million bags.
Higher coffee exports from Brazil are bearish for prices. Last Wednesday, Cecafe reported that Brazil’s 2024 arabica coffee exports jumped +20% y/y to a record 37 million bags, and 2024 Brazil robusta coffee exports surged +98% y/y to a record 9.4 million bags.
An increase in inventories is bearish for coffee prices after ICE-monitored robusta coffee inventories rose to a 3-3/4 month high Friday of 4,603 lots. ICE-monitored arabica coffee inventories rose to a 2-1/2 year high of 993,562 bags on January 6, but have since fallen back and dropped to a 6-week low of 928.935 bags on Friday.
News of larger global coffee exports is bearish for prices. On December 5, the International Coffee Organization (ICO) reported that Oct global coffee exports for the beginning of the 2024/25 season rose +15.1% y/y to 11.13 mln bags. Global coffee exports for 2023/24 (Oct-Sep) rose +11.7% y/y to 137.27 mln bags. Also, Brazilian coffee export news has been bearish. Cecafe reported Wednesday that Brazil’s 2024 coffee exports rose +30.2% y/y to a record 46.3 million bags.
In a bearish factor, the International Coffee Organization (ICO) recently said that 2023/24 global coffee production climbed +5.8% y/y to a record 178 million bags due to an exceptional off-biennial crop year. ICO also said global 2023/24 coffee consumption rose +2.2% y/y to a record 177 million bags, resulting in a 1 million bag coffee surplus.
The USDA’s biannual report on December 18 was mixed for coffee prices. The USDA’s Foreign Agriculture Service (FAS) projected that world coffee production in 2024/25 will increase +4.0% y/y to 174.855 million bags, with a +1.5% increase in arabica production to 97.845 million bags and a +7.5% increase in robusta production to 77.01 million bags. The USDA’s FAS forecasts that 2024/25 ending stocks will fall by -6.6% to a 24-year low of 20.867 million bags from 22.347 million bags in 2023/24. Separately, the USDA’s FAS on November 22 projected Brazil’s 2024/25 coffee production at 66.4 MMT, below the USDA’s previous forecast of 69.9 MMT. The USDA’s FAS projects Brazil’s coffee inventories at 1.2 million bags at the end of the 2024/25 season in June, down -26% y/y.
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