Coffee Prices Jump on Frost Concerns in Brazil

Coffee prices have been sharply higher today, with arabica coffee (KCU24) up by 9.70 (+4.30%) and ICE robusta coffee (RMU24) up by 5.17%. The rise in coffee prices is attributed to frost risks in Brazil, which could damage the country’s coffee crops. The International Coffee Organization (ICO) reported that global June coffee exports rose by 3.8% y/y to 10.78 million bags, while Oct-Jun global coffee exports were up by 10.1% y/y to 103.47 million bags.

Coffee harvest pressures in Brazil are also bearish for prices, as Brazil’s 2024/25 coffee harvest was 87% completed as of July 29, faster than 80% last year and faster than the 5-year average of 84%. The weaker Brazilian real (^USDBRL) is another bearish factor for coffee prices, as the real dropped to a 3-1/3 year low against the dollar Monday.

A rebound in ICE coffee inventories from historically low levels is negative for prices, as ICE-monitored robusta coffee inventories rose to a 1-year high of 6,521 lots on July 25 and 842,434 bags on June 25, up from the 24-year low of 224,066 bags posted in November 2023. 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, as Vietnam’s July coffee exports fell by 35.7% y/y to 70,000 MT and Jan-July coffee exports were 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.

The USDA’s bi-annual report on June 20 was bearish for coffee prices, with the 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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