Tag: Coffee Price

Arabica Rebounds: Brazil Drought Fears Drive Price Surge Despite Tariff Removal Pressure

Posted on by Qahwa World

Dubai – Qahwa World

Arabica coffee futures experienced a strong rally today, Monday, fueled by renewed concerns over Brazil’s current crop conditions. This upward movement reflects the market’s conflicting forces, which are still reacting to the executive order on tariff removal issued late last week.

March Arabica coffee futures (KCH26) surged by $7.40 (+2.00%) today, following a report highlighting alarming dry conditions in Brazil. Somar Meteorologia reported that Minas Gerais, the country’s largest Arabica-growing state, received only 26.4 mm of rain in the week ended November 21, amounting to just 49% of the historical average. This significant rainfall deficit raises concerns about the health and development of the current crop, providing strong support for the market price.

Further bolstering the price are shrinking stockpiles. ICE-monitored Arabica inventories have fallen to a 1.75-year low of 398,645 bags. This inventory drawdown is a direct consequence of previously imposed US tariffs on Brazilian coffee imports, which led American buyers to void new contracts, severely tightening US supplies, as Brazil typically supplies about a third of America’s unroasted coffee.

Despite today’s rally, prices remain near the 7-week low recorded in the previous session. That sharp decline was triggered by the US President signing an executive order late last Thursday, exempting Brazilian agricultural products, including green coffee, from the existing 40% tariffs. This tariff removal, which does not cover instant coffee, created immediate downward pressure as traders anticipated a greater influx of Brazilian supply into the US market.

Longer-term expectations for Brazil’s next crop continue to act as a bearish factor. StoneX analysts last week forecast that Brazil will produce 70.7 million bags of coffee in the 2026/27 season, including 47.2 million bags of Arabica, representing a projected 29% year-on-year increase. Furthermore, Climatempo forecasts suggest heavy rainfall will continue in growing regions this week, providing favorable growth conditions for the subsequent crop.

In the Robusta market, January futures (RMF26) edged lower by 12 points (-0.27%), pressured by forecasts for drier weather in Vietnam. Improved dry conditions are expected to allow the resumption of the Robusta harvest in key provinces like Dak Lak, easing supply delay concerns in Vietnam, the world’s largest Robusta producer. Official data previously showed that Vietnam’s coffee exports for January through October 2025 rose 13.4% year-on-year.

Global Coffee Price Surge Propels Indian Exports to New Heights in 2024

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India’s 2024 exports could rise 10% to 298,000 T
European buyers paying premium for Indian beans
Untimely rains, labour scarcity delaying harvesting

India’s coffee exports are likely to rise as much as 10% in 2024 as a rally in global prices prompts European buyers to pay premiums in order to increase purchases from the country, industry officials told Reuters.

The South Asian country – famous as a tea producer – is also the world’s eighth-largest coffee grower, mainly churning out the robusta beans used to make instant coffee. It also produces some of the more expensive arabica variety.

“The demand for Indian coffee, particularly robusta beans, is strong due to firm global prices resulting from production issues,” said Ramesh Rajah, president of the Coffee Exporters’ Association of India, predicting a rise in exports this year of up to 10%.

Robusta coffee is trading near its highest in at least 15 years as Vietnam, the world’s biggest producer, is expected to produce less in 2023/24 than the previous season.

India exports three quarters of its production mainly to Italy, Germany and Belgium.

Indian coffee typically commands a premium over the global benchmark because it is grown under shade, hand-picked, and sun-dried. However, this year, premiums are higher than normal due to a production shortfall, exporters said.

Coffee exports in 2024 could jump to 298,000 metric tons from last year’s 271,420 tons, said a Bengaluru-based dealer with a global trade house.

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Indian robusta cherry is fetching a premium of nearly $300 a tonne over London futures because of strong demand, he said.

WEATHER WOES
While export demand is good, traders are waiting for supplies to increase, which could bring down local prices, the dealer said.

This season’s robusta harvest is almost 20% complete, although rainfall in recent days in growing areas has been disruptive, said M M Chengappa, a coffee grower from Kodagu, in top producing Karnataka state.

The state-run Coffee Board has estimated that India’s production could rise to 374,200 tons in the 2023/24 season, which started on Oct. 1, up from last year’s 352,000 tons. However, farmers are saying that rainfall is limiting the upside in production.

“Torrential unseasonal rain in the last few days, along with the rains in December, has caused a lot of fruit droppings,” said Chengappa.

Harvesting is also slowed by labour scarcity, despite offers of higher wages, said exporter Rajah.

“Global prices are rising, but Indian farmers’ income is not rising in the same proportion due to higher production costs. They need to spend more on inputs and wages,” Rajah said.