Coffee Prices Finish Sharply Higher on Frost Fears in Brazil

Coffee prices have surged for a second day, with arabica and robusta posting 3-week highs. The surge is due to carryover support from Tuesday’s forecast of Brazil’s temperatures potentially dropping to near freezing next week, damaging the country’s coffee crops. On Monday, coffee prices fell to 1-month lows due to an increase in global coffee supplies, with global June coffee exports rising by 3.8% y/y to 10.78 million bags and Oct-Jun global coffee exports up by 10.1% y/y to 103.47 million bags.

Coffee harvest pressures in Brazil are also bearish for prices, with Brazil’s 2024/25 coffee harvest being 87% completed as of July 29, faster than 80% last year and faster than the 5-year average of 84%. A rebound in ICE coffee inventories from historically low levels is negative for prices, with robusta coffee inventories rising to a 1-year high of 6,521 lots and arabica coffee inventories rising to a 1-1/2-year high of 842,434 bags.

Concerns about dry weather in Brazil are supportive of coffee prices, as Brazil’s Minas Gerais region received 0.4 mm of rain last week, which accounts for about 30% of Brazil’s arabica crop. Smaller coffee exports from Vietnam, the world’s largest robusta coffee producer, are bullish for prices, with Vietnam’s July coffee exports falling -35.7% y/y to 70,000 MT and Jan-July coffee exports down -13.8% y/y at 964,000 MT.

Robusta coffee prices are underpinned by fears that excessive dryness in Vietnam will damage coffee crops and curb future global robusta 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.

The USDA’s bi-annual report on June 20 was bearish for coffee prices, with the Foreign Agriculture Service (FAS) projecting a +4.2% y/y increase in world coffee production in 2024/25, with a +4.4% increase in arabica production to 99.855 million bags and a +3.9% increase in robusta production to 76.38 million bags.

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