Spilling the Beans on the Coffee Market
Trending Tuesdays in the Coffee World
Coffee Prices on the Rise Following Slack Brazilian Rainfall Impacting Arabica Crop Yields
Last Tuesday, Arabica coffee (KCN25) shot up +1.60 (+0.41%), while July ICE Robusta coffee (RMN25) dropped -35 (-0.66%). Here's the skinny on what caused these ripples in the coffee world.
Arabica coffee got a boost on Tuesday, thanks to a bit of rain in Brazil. Somar Meteorologia reported that Minas Gerais, the Brazilian region responsible for 50% of the country's Arabica coffee production, only received 1.5 mm of rain during the week ending April 26 - a mere 21% of the average in that period. This news sparked fears of a diminished Brazilian coffee crop, potentially supporting Arabica prices.
However, the party didn't last long, as Arabica coffee stumbled back from its peak due to an upward revision of Brazil's 2025 coffee production estimate by Conab, Brazil's crop forecasting agency. They raised the estimate to 55.7 million bags from a January estimate of 51.81 million bags.
Robusta coffee, on the other hand, slid into negative territory, losing -0.66%, despite reduced Robusta production in Vietnam. Drought cut Vietnam's coffee production for the 2023/24 crop year by -20% to 1.472 MMT - the smallest crop in four years[5]. Additionally, Vietnam's Global Statistics Office revealed a decline in exports to 1.35 MMT during 2024[5].
A Mugfull of Market Nuances
Producers and importers worldwide are sweating over the U.S.'s 10% tariff on coffee imports. Companies such as Starbucks, Hershey, and Mondelez International have expressed concern that the tariffs could bolster coffee prices and squeeze sales volumes[3].
Global coffee inventories paint a mixed picture. ICE-monitored Robusta coffee inventories bottomed out at a 4-month low of 4,225 lots[3]. On the flip side, Arabica coffee inventories rose to a 2.5-month high of 838,385 bags[3].
From Brazil to Vietnam: The Coffee Landscape
Brazil is expected to produce around 62.8 million bags of coffee for the 2025/26 season, according to Rabobank, although Safras&Mercado has upped its forecast to 65 million bags, with estimates of 40 million bags for Arabica and approximately 25-26 million bags for Robusta[1].
Weather plays a significant role in Brazil's coffee production. Recent rains have improved prospects after prior dry spell concerns, while a mild La Niña pattern is expected to encourage rain in coffee-growing regions[4].
Vietnam, the world's largest Robusta producer, is still struggling to recover from a drought-induced production drop. The 2023/24 crop year saw a decrease of -20% in production to 1.472 MMT[5], with exports plummeting -17.1% year-over-year to 1.35 MMT in 2024[5].
The balance between supply constraints (especially in Arabica) resulting from Brazil's weather conditions and demand concerns (such as broader market fluctuations) will play a crucial role in global coffee prices[5]. The reduced Robusta output in Vietnam helps sustain Robusta prices, while an increase in Arabica coffee output could moderate its prices if Brazilian exports grow substantially[5].
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On the date of publication, the author did not have positions in the securities mentioned in this article. All information and data in this article is provided solely for informational purposes.
[1] Safras&Mercado, Brazil Coffee Outlook for the 2023/2024 marketing year[2] Rabobank, Brazil Coffee Outlook[3] Reuters, Coffee prices steady as drought concerns offset downtrend in Brazil output[4] Climate Change, La Niña and its impact on coffee-growing regions[5] Vietnam General Statistics Office, Coffee export: falling -17% in 2024
- In the upcoming 2025, Conab revised the estimated Arabica coffee production in Brazil to 55.7 million bags, which may moderate the price increase caused by the short rainfall in Minas Gerais.
- By contrast, Vietnam, the world's largest Robusta producer, saw a -20% reduction in the 2023/24 crop year due to drought, potentially intensifying the demand and price for Robusta coffee.
- In sports, the pending 10% tariff on coffee imports by the U.S. may have a severe impact on global coffee sales volumes for multinational companies such as Starbucks, Hershey, and Mondelez International.
