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MILAN – Coffee futures prices recovered slightly in the last session of the month and of the 2024/25 coffee year. Yesterday, Tuesday 30 September, the ICE Arabica contract for December delivery gained 0.7%, rising to 374.85 cents. In London, the contract for November delivery rose 0.3% to close at $4,200. The main bullish factor this time was the weather in Vietnam. Typhoon Bualoi has claimed dozens of casualties and missing persons. Heavy rains and have caused flooding on some coffee farms and roads.
The information available now is fragmentary, and we will only have more details on any damage to crops in the coming days.
In an interview with Notícias Agrícolas, Fernando Maximiliano, an analyst at StoneX, discusses the possible developments in the coffee markets over the coming months. We summarise some of the salient points below.
Maximiliano begins by noting that the current price volatility has been observed for some time and depends on a number of factors impacting the market.
Firstly, according to StoneX estimates, global stocks have fallen by 22 million bags over the last four years. Low stock levels tend to support coffee prices as they reduce the amount of buffer stock available in the event of supply shocks or supply chain disruptions.
Conversely, strong inflation in coffee prices has a negative impact on consumption. For example, ABIC (the Brazilian Coffee Industry Association) has found that Brazilian retail consumption fell by 5.4% in the first eight months of the year.
We must also take into account this year’s decline in Arabica production in Brazil. There are also uncertainties related to the current weather situation and the amount and seasonal distribution of rainfall in the coffee belt.
We are therefore seeing a combination of bullish and bearish factors, which explains the volatility we are currently observing.
When will a better balance between supply and demand be achieved?
We expect a substantial balance between supply and demand in 2025/26, says Maximiliano, with a slightly positive balance of around 400,000 bags, despite the decline in Brazilian production. This is thanks to expected increases in Asia, particularly in Indonesia and Vietnam, where production is expected to grow by 7%. At the same time, consumption is falling in some countries, starting with Brazil and the US.
For this reason, we anticipate a 3% decline in global consumption. This should result in production and consumption being roughly equal, but this is not reassuring given that stocks remain low.
The situation will become more encouraging when stocks are replenished, which will not be possible this year but could begin in 2026/27 if the Brazilian production recovers.
