Robusta Coffee Rises on Dwindling Global Supplies

Coffee prices have fluctuated today, with robusta coffee reaching a four-week high in the nearby futures market. Robusta prices have risen because of fewer global supplies, while higher exports from Brazil have pushed arabica prices down. Notably, Brazil's Trade Ministry recorded a 44% year-on-year growth in July coffee exports, totalling 202,000 metric tons. Cecafe also reported a record-breaking 47.3 million bags exported in Brazil's 2023/24 season, representing a 33% year-on-year increase. The International Coffee Organization (ICO) also reported a 3.8% year-on-year gain in worldwide coffee shipments in June, bringing the total for the October-June period to 103.47 million bags, up 10.1% over the previous year.

Conversely, the drop in coffee exports from Vietnam, the world's largest producer of robusta, is driving up robusta prices. Vietnam's coffee exports in July decreased 29.3% year on year to 76,982 metric tons, while total exports from January to July fell 12.4% year on year to 979,353 metric tons.

Concerns about Brazil's weather conditions boost robusta prices, since recent dry spells may cause premature flowering in coffee trees, potentially limiting the 2024/25 coffee crop yield. Cooxupe, Brazil's largest coffee cooperative, observed persistent stress in coffee trees across multiple regions due to a lack of significant rainfall during the previous 120 days. Furthermore, Somar Meteorologia said that Brazil's Minas Gerais region, which produces roughly 30% of the country's arabica coffee, received no rain last week, accounting for 0% of the historical average.

The Brazilian real's strengthening versus the dollar has pushed up coffee prices by discouraging exports from Brazil's coffee growers. Despite these positive indicators, a recent increase in ICE coffee inventory has knocked on pricing. As of July 25, ICE-monitored robusta coffee stocks have reached a one-year high of 6,521 lots, up from a record low of 1,958 lots in February 2024. Similarly, arabica coffee inventories increased to a 1.5-year high of 842,434 bags on June 25, from a 24-year low of 224,066 bags in November 2023.

The market is nonetheless concerned about the impact of prolonged drought in Vietnam, which could affect global robusta supply. Coffee trader Volcafe said in May that Vietnam's robusta coffee crop for 2024/25 could be as low as 24 million bags, the lowest in 13 years, due to irreversible damage caused by inadequate rains. Volcafe also anticipates a global robusta shortage of 4.6 million bags in 2024/25, the fourth consecutive year of scarcity, albeit the deficit would be smaller than the 9 million bags reported in 2023/24. 

 Vietnam's agriculture ministry had already predicted a 20% decrease in coffee production for the 2023/24 crop year, resulting in the weakest crop in four years at 1.472 million metric tons. Furthermore, the Vietnam Coffee Association anticipates a 20% decrease in coffee exports during the same period, to 1.336 million metric tons.

On the negative side, the ICO reported in May that worldwide coffee production for 2023/24 climbed by 5.8% year on year, reaching 178 million bags, owing mostly to an unusual off-biennial crop year. Global coffee consumption rose by 2.2% year on year to 177 million bags, leaving a 1 million bag surplus. 

The USDA's bi-annual report, released in June, pushed prices upward by anticipating a 4.2% year-on-year growth in worldwide coffee production for 2024/25, totalling 176.235 million bags. This comprises a 4.4% increase in arabica production (99.855 million bags) and a 3.9% increase in robusta production (76.38 million bags). The USDA's Foreign Agriculture Service (FAS) also forecasts a 7.7% year-on-year increase in ending stocks in 2024/25, to 25.78 million bags from 23.93 million in 2023/24. Brazil's arabica production in 2024/25 is predicted to increase by 7.3% year on year to 48.2 million bags, owing to greater yields and additional planted land. Colombia, the world's second-largest arabica grower, is expected to witness a 1.6% year-on-year increase in coffee production, hitting 12.4 million bags in 2024-25.