Coffee Prices Finish Sharply Higher on Risks to Global Coffee Production

Coffee prices have seen a sharp rally, with arabica and robusta coffee posting highs. This is due to concerns that drier-than-normal conditions could adversely affect Brazil’s and Vietnam’s coffee crops. Brazil’s Minas Gerais region received 1.3 mm of rain last week, which accounts for about 30% of Brazil’s arabica crop. The National Oceanic and Atmospheric Administration (NOAA) reported that some coffee producers in Central America still face a moisture deficit following a drought at the start of the season.

Robusta coffee prices are underpinned by fears that excessive dryness in Vietnam will damage coffee crops and curb global robusta production. Coffee trader Volcafe said that Vietnam’s 2024/25 robusta coffee crop may only be 24 million bags, the lowest in 13 years, as poor rainfall in Vietnam has caused “irreversible damage” to coffee blossoms. Volcafe also projects a global robusta deficit of 4.6 million bags in 2024/25, a smaller deficit than the 9-million-bag deficit seen in 2023/24 but the fourth consecutive year of robusta bean deficits.

Small coffee exports from Costa Rica, the world’s fifth largest producer of arabica coffee, are bullish for arabica prices. Costa Rican coffee exports during Oct-Jun fell -7.6% y/y to 702,097 bags. Coffee harvest pressures in Brazil are negative for coffee prices, as Safras & Mercado reported that Brazil’s 2024/25 coffee harvest was 58% completed as of July 2, faster than 52% last year at the same time and faster than the 5-year average of 54%.

A rebound in ICE coffee inventories from historically low levels is negative for prices. ICE-monitored robusta coffee inventories rose to a 1-year high on June 20 of 5,995 lots, up from the record low of 1,958 lots posted in February 2024. ICE-monitored arabica coffee inventories rose to a 16-month high on June 25 of 842,434 bags, up from the 24-year low of 224,066 bags posted in November 2023.

Recent bearish coffee export news includes the International Coffee Organization (ICO) reporting that global May coffee exports rose +9.8% y/y to 11.78 million bags, and Oct-May global coffee exports were up +10.9% y/y at 92.73 million bags. The USDA’s bi-annual report released on June 20 was bearish for coffee prices, with the FAS projecting an increase in world coffee production in 2024/25.

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