Coffee Prices Climb on Dollar Weakness and Crop Concerns

Coffee prices are moderately higher today, with the dollar index dropping to a 2-week low. Fears of excessive dryness in Brazil and Vietnam will damage coffee crops and curb global production. Coffee trader Volcafe reported 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.

Gains in arabica coffee are limited today due to Somar Meteorologia reporting that Brazil’s Minas Gerais region received 25.6 mm of rain, or 135% of the historical average in the past week. Vietnam, the world’s largest producer of robusta coffee beans, is a bullish factor, with Vietnam’s agriculture department projecting a -20% drop in coffee production in the 2023/24 crop year due to drought. The Vietnam Coffee Association also projected a -20% drop in 2023/24 coffee exports.

Recent bearish coffee export news includes a rebound in ICE coffee inventories from historically low levels, which fell to a record low of 1,958 lots on February 21 but recovered to a 9-1/2 month high last Tuesday of 4,699 lots. The El Nino weather event has been bullish for coffee prices, with an El Nino pattern typically bringing heavy rain to Brazil and drought to India, negatively impacting coffee crop production.

The International Coffee Organization (ICO) projected that 2023/24 global coffee production would climb +5.8% y/y to 178 million bags due to an exceptional off-biennial crop year. The USDA’s Foreign Agriculture Service (FAS) projected that world coffee production in 2023/24 will increase +4.2% y/y to 171.4 million bags, with a +10.7% increase in arabica production to 97.3 million bags and a -3.3% decline in robusta production to 74.1 million bags.

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