That would be my guess too - there's nothing to control how fast the Processing application writes characters to the Arduino so it could easily exceed the speed of the (very slow) serial link you are using. You need to control the transmission frequency to ensure that the serial connection doesn't ever get congested.
Also, I strongly suggest you stop using the problematic String class in your Arduino sketch. It isn't making your life any easier here, and means that you're hammering the Arduino's heap for no good reason. Just use c-strings (null-terminated char arrays) instead.
Finally, I suggest you only format the Arduino's output string when you are about to send it - at the moment you format it regardless of whether it's time to send it.