Coffee Prices Retreat on Larger Brazil Coffee Exports

Coffee prices are currently moderately lower, with arabica and robusta posting a 2-1/2 week low and 1-week low respectively. Brazil’s faster coffee harvest has boosted coffee supplies, with the 2024/25 coffee harvest being 29% completed as of June 4, faster than last year and the 5-year average of 27%. The lack of rain in Brazil’s Minas Gerais region supports arabica coffee, which accounts for about 30% of Brazil’s arabica crop.

Recent bearish coffee export news includes a rebound in ICE coffee inventories from historically low levels, with robusta coffee inventories falling to a record low of 1,958 lots but recovering to an 11-month high of 5,763 lots. Robusta coffee prices are underpinned by fears that excessive dryness in 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.

Tight robusta coffee supplies from Vietnam, the world’s largest producer of robusta coffee beans, are a bullish factor. Vietnam’s agriculture department projected that Vietnam’s coffee production in the 2023/24 crop year would drop by -20% to 1.472 MMT, the smallest crop in four years, due to drought. The Vietnam Coffee Association also predicted that Vietnam’s 2023/24 coffee exports would drop -20% y/y to 1.336 MMT.

The past year’s El Nino weather event has been bullish for coffee prices, with heavy rain in Brazil and drought in 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.

In conclusion, coffee prices are being pressured by factors such as the weaker Brazilian real, faster coffee harvest, and the impact of El Nino weather events on coffee production.

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