Coffee Prices Fluctuate Amid Rising Production and Demand Concerns

Coffee markets are under pressure as production forecasts rise, and demand concerns emerge. Recent reports show increased inventory levels and potential reduced exports, impacting coffee prices. Professional investors should be wary of the volatility ahead.

Date: 24-05-2025

AI Rating: 5

Market Overview: Coffee prices are currently experiencing fluctuations due to conflicting factors affecting supply and demand. The recent rise in coffee production forecasts from major producers like Brazil and Vietnam is adding downward pressure on prices. Conversely, the threat of poor weather conditions in Brazil raises caution.

Earnings Implications: Companies reliant on coffee as a commodity, such as Starbucks, Hershey, and Mondelez International, voiced concerns over rising imports tariffs, potentially impacting their profitability. This sentiment may weigh on stock performance, particularly if higher commodity prices translate into lower sales volumes.

Inventory Levels: The analysis showed increased coffee inventories at ICE, with robusta coffee inventories reaching an 8-month high. This rise is likely to exacerbate downward pressure on prices in the near term, as higher supply coupled with demand concerns could lead to reduced profit margins for coffee-related companies.

Production Outlook: The USDA's projections forecast significant increases in coffee production, impacting the market balance. Brazil's anticipated rise in arabica production by 0.5% y/y and Vietnam's 6.9% increase in coffee output could lead to an oversupply situation, potentially causing further price declines. However, the mixed projections regarding Brazil's upcoming crops due to drought may create temporary support for prices if these concerns materialize.

Export Data: Reports indicate reduced coffee exports from Brazil, decreasing by 28% y/y in April, which contributes to market support despite rising production forecasts. Moreover, concerns regarding the dry weather's impacts on the arabica coffee crop could add upward pressure on coffee prices if the supply becomes constrained.

Stocks: SBUX HSY MDLZ