Ag Weather Forum

The world's soft commodities such as coffee, cocoa and orange juice have a unique place in the business world. They are thinly traded -- with few active investors -- but are widely consumed. As a result, any substantial price increase will make its way into what we pay for the morning java and OJ or the box of chocolates. And in 2024, all three of these highly consumed crops had production cuts, in large part, because of extreme weather and associated big price rallies on the commodity market.

COFFEE:

The year 2024 was a disastrous year weatherwise in Brazil, which typically produces around 40% of the world's coffee supply. Drought shriveled up flowers on the coffee trees (which produce new coffee beans) and shrank the size of beans that did develop. In addition, drought and heat provided a favorable environment for wildfire activity which, in some cases, destroyed coffee trees.

In addition to drought, much of the Brazil coffee belt was hit with a freeze during mid-August, which killed some of the newly developing coffee crop. The Associated Press reported the 2024 harvest season in Brazil was "... virtually flat from last year, and exports surged, but the ongoing drought is already complicating the start of the 2025-26 season ..." Meanwhile, Vietnam, the No. 2 coffee-producing country, had damage to its crop from heat, drought and typhoon activity in 2024. At the end of 2024, coffee prices on the futures markets were reportedly at their highest levels (adjusted for inflation) in 13 years on the International Commodity Exchange.

COCOA:

Cocoa futures market prices soared higher than even bitcoin in 2024. Details provided by DTN Contributing Grains Analyst Mitch Miller show cocoa opened at $4,209 U.S. dollars per metric ton in January 2024 and skyrocketed to $12,931 USD per metric ton on Dec. 18 -- the highest price in 50 years. Crop-damaging weather in West Africa, which grows more than 70% of the world's cocoa, was a big reason for this rally. West Africa was hit by very heavy rain last summer and by drought this past fall. Recent reports on cocoa bean volume at export facilities show volume is below the five-year average, which points to lower crop size in 2025. The retail price is forecast to move up in 2025 with at least a 10% increase in consumer chocolate prices.

ORANGE JUICE:

U.S. orange production is much lower than 10 years ago, due in large part to the impact of a disease called citrus greening. But hurricane damage has caused additional losses. Hurricane Irma in 2017 and Hurricane Ian in 2022 reduced orange harvests. And this year, Hurricane Milton tore through the heart of Florida's citrus groves, leaving extensive damage. USDA's December crop production report lowered its estimate for Florida's total orange production by 20% from previous forecasts after the impact of the hurricane. And in Brazil, drought which has affected coffee production has also hit the orange groves. USDA's Foreign Ag Service noted in a report dated Dec. 20, 2024, "Dry weather has reduced fruit production for five consecutive seasons in the citrus belt -- the northwest of Sao Paulo and the western part of Minas Gerais," a region known as Triangulo Mineiro.

As noted, the big rallies in soft commodities are not strictly due to weather calamities. International armed conflict, political turmoil and crop diseases also contribute to this price spike. However, the changing character of tropical and subtropical weather from dependable to variable suggests a much more volatile and costly scenario for these crops in the markets and at the checkout stands worldwide as 2025 gets underway.

Bryce Anderson can be reached at bryce.anderson@dtn.com

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