Coffee prices rose on Tuesday due to reduced rainfall in Brazil, threatening crop yields. Arabica inventory levels are at a low, while Brazilian producers are selling their harvests more quickly than in previous years. Reports forecast declining coffee production and supply concerns, impacting prices globally. The USDA projects mixed outcomes for coffee inventories and exports, emphasizing ongoing drought effects.
Coffee prices rose on Tuesday, with May arabica coffee closing up 3.04% and May ICE robusta coffee up 2.90%. The increase can be attributed to below-normal rainfall in Brazil, which threatens coffee crop yields. Specifically, the largest arabica-growing region, Minas Gerais, received only 24% of its historical average rainfall last week, according to Somar Meteorologia. This concern for lower yields in Brazil, the world’s top arabica coffee producer, has supported prices.
Additionally, inventory levels for both arabica and robusta coffee have declined, further bolstering prices. As of last Friday, ICE-monitored robusta coffee inventories fell to a two-month low of 4,247 lots. Arabica inventories saw a decrease to a 9.25-month low of 758,514 bags, although they have since increased slightly to 809,128 bags as of last Thursday.
A notable bullish trend is the accelerated sale of Brazil’s 2024/25 coffee harvest, with 88% sold by February 11, compared to 79% from the previous year and a five-year average of 82%. However, sales of the 2025/26 crop have been sluggish at just 13% sold, suggesting fewer supplies are available and producers’ reluctance to sell.
Supply concerns continue with reports indicating a 1.6% year-over-year decline in Brazil’s green coffee exports in January, totaling 3.98 million bags. Brazil’s crop forecasting agency, Conab, predicts a -4.4% decrease in the 2025/26 coffee crop, propped by ongoing drought conditions.
Brazil has been experiencing its driest weather in over four decades, which impacts coffee trees significantly, especially during the flowering stage. Colombia, the second-largest producer of arabica coffee, is also recovering slowly from drought spurred by the El Niño phenomenon, further affecting the supply chain.
Robusta coffee prices are supported by diminishing production in Vietnam, which has seen a 20% drop to 1.472 million metric tons due to drought conditions. Furthermore, the USDA FAS projects a slight decrease in Vietnam’s robusta production for the 2024/25 marketing year.
On the contrary, reports from Conab indicate increased global coffee exports, with Brazil’s export figures rising to a record 50.5 million bags in 2024, even as global exports declined year-over-year.
The USDA’s biannual report offers mixed insights, projecting a 4% increase in world coffee production for 2024/25 while indicating a drop in ending stocks to a 25-year low. It also revised Brazil’s total production estimates downward, forecasting significant production deficits in future marketing years due to persistent drought conditions.
In conclusion, coffee prices are currently supported by adverse weather conditions in Brazil and shrinking inventory levels. The early sale of the coffee harvest indicates apprehension among producers, while concerns about reduced future crop yields loom. Both regional and global climatic events, along with detailed reports from agricultural bodies, suggest ongoing pressures on coffee supply, likely influencing market prices in the future.
Original Source: www.tradingview.com
