Arabica Coffee Mar '25 (KCH25)
304.80 USc/lb +2.70 (+0.89%) 25/11/24 [ICE/US]
Price of Arabica today: $10.43 AUD/kg
Robusta Coffee 10-T Jan '25 (RMF25)
5,110 USD/MT +125 (+2.51%) 25/11/24 [ICE/EU]
Price of Robusta today: $7.93 AUD/kg
Record Price Surges and Market Dynamics
Coffee prices have seen historic highs. In November 2024, March Arabica futures climbed to a 27-year high, while December futures reached 13-year peaks. Arabica prices hit USD 305.25 per pound on November 25, marking a 6.6% weekly increase. Robusta followed suit, reaching USD 4,985 per ton, a 4.4% rise over the same period.
Several factors drove this surge. Below-average rainfall in Brazil, the world's largest Arabica producer, has been the primary concern. The drought, described as the worst since 1981, has severely impacted the flowering stage of coffee trees, reducing 2025/26 crop projections. Meanwhile, Vietnam, the top Robusta exporter, faced declining production and flooding risks, further tightening global supplies.
Export Trends and Regional Performance
Green coffee exports rose significantly in September 2024, up by 25% year-on-year to 9.69 million bags. South America led the charge with a 30.8% increase, largely driven by record exports from Brazil, which compensated for Vietnam's declining Robusta shipments. Africa and Asia also posted robust growth, with Ethiopia setting a record of 5.59 million bags.
However, the growth in exports highlights a recovery rather than expansion. The global coffee market is regaining ground lost during two years of downturn. Challenges such as shifting climatic conditions and localized issues, like the bankruptcy of Nicaragua's major exporter, continue to cast uncertainty.
Regulatory Pressures and Their Impact
The European Union Deforestation Regulation (EUDR) has emerged as a critical factor influencing coffee markets. The regulation mandates stricter traceability for agricultural imports, including coffee, to curb deforestation. Although the implementation has been postponed to 2025/2026, it has already affected market sentiment. The announcement in October 2024 caused the ICO Composite Indicator Price (I-CIP) to drop by 3.2%.
Producers are grappling with the compliance burden, which may disadvantage smaller growers. Nevertheless, it has spurred initiatives for sustainable and traceable coffee production, which could reshape industry practices in the long term.
Outlook and Strategic Implications
The International Coffee Organization (ICO) projects global production for the 2023/24 coffee year to reach a record 178 million bags, up by 5.8% year-on-year. However, consumption is also expected to hit new highs at 177 million bags, leaving a modest surplus. This tight balance underscores the market's vulnerability to supply shocks.
As climate change increasingly impacts coffee production, diversification and sustainability efforts will be crucial. Producers must adapt to regulatory changes and shifting consumer preferences for traceability and eco-friendly practices. For traders and buyers, understanding regional dynamics and leveraging futures markets will be vital in navigating price volatility.
Glossary of Key Terms
Futures Market: A financial market where participants trade standardized contracts to buy or sell commodities, like coffee, at a predetermined price and date in the future.
ICO Composite Indicator Price (I-CIP): A weighted average of daily coffee prices for Arabica and Robusta, published by the International Coffee Organization (ICO).
USDA: The United States Department of Agriculture, which provides global agricultural forecasts and data, including coffee production and consumption reports.
EUDR: European Union Deforestation Regulation, a law to prevent deforestation linked to agricultural imports by requiring traceability and certification.
ICE Monitored Inventories: Coffee stocks held in warehouses monitored by the Intercontinental Exchange, an indicator of supply tightness or surplus.
Somar Meteorologia: A Brazilian meteorological agency that provides climate data crucial for agricultural forecasting.
Cemaden: Brazil's National Center for Monitoring and Early Warning of Natural Disasters, which tracks droughts and other climate events.
Conab: Brazil’s crop forecasting agency, which provides production and export estimates.
Differential: The price difference between coffee varieties or market locations, reflecting quality and logistical factors.
Biennial Production Cycle: A pattern in coffee plants where high-yield and low-yield years alternate, affecting supply predictability.
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