Arabica coffee prices increased due to Brazil’s dry weather threatening yields. In contrast, robusta prices fell amid expected rainfall in Vietnam. Inventory declines and rapid sales from Brazil’s coffee harvest are contributing to market dynamics, while global coffee output faces challenges. Prospective deficits loom, highlighting the need for close attention to supply conditions and weather impacts.
Arabica coffee prices experienced a rise, closing at +11.55 (+2.90%) on Wednesday due to dry and hot weather conditions in Brazil which threaten coffee yields. The situation may worsen as these conditions persist through the week ahead of the May harvest. Conversely, robusta coffee prices declined slightly amidst forecasts of increased rainfall in Vietnam, likely improving local coffee yields.
Brazil’s largest arabica coffee-producing area, Minas Gerais, reported receiving only 11.4 mm of rain—just 24% of its historical average—during the week before February 22, signaling a concerning dry trend. As the world’s leading producer of arabica coffee, these adverse weather conditions risk diminishing crop output.
The drop in inventories is contributing to rising coffee prices, with robusta coffee stocks declining to a two-month low of 4,247 lots as of last Friday. Meanwhile, arabica coffee inventories fell to a 9-1/4 month low of 758,514 bags before rising to 809,128 bags last Thursday.
A key sales indicator shows that 88% of Brazil’s 2024/25 coffee harvest has been sold as of February 11, exceeding last year’s 79% and the five-year average of 82%. In contrast, only 13% of the 2025/26 crop has been sold, suggesting diminished new supply as producers appear hesitant to release further stock.
Ongoing supply concerns bolster coffee prices, with Brazil’s green coffee exports falling -1.6% year-over-year in January to 3.98 million bags. Additionally, Brazil’s government has forecasted a -4.4% drop in the 2025/26 coffee crop to a three-year low of 51.81 million bags, and revised its 2024 crop estimate down by -1.1%.
Continued dry conditions exacerbated by the previous year’s El Nino event could result in long-term damage to coffee crops in South and Central America. Brazil has seen below-average rainfall since April, impacting vital flowering stages and jeopardizing future arabica crop yields. Colombia, the second-largest arabica producer, is recovering from a similar drought.
Robusta coffee prices remain supported due to reduced production in Vietnam caused by drought, which has cut the anticipated 2023/24 crop by -20% to 1.472 MMT. The USDA projects slight declines in Vietnam’s robusta output in 2024/25. Despite declines, Vietnam’s coffee production estimates were revised upward recently.
In terms of global trade, Brazil’s coffee exports surged +28.8% year-on-year, reaching a record 50.5 million bags. Meanwhile, Vietnam’s January coffee exports increased by +6.3%. However, global coffee exports reflected a decline, falling -12.4% in December compared to the previous year.
The USDA’s biannual report predicts a mixed landscape for coffee prices, projecting a +4.0% increase in world coffee production for 2024/25. Notably, Brazilian coffee production estimates were lowered to 66.4 MMT, reflecting severe drought effects. Projections suggest a continued deficit in arabica coffee, with a potential -8.5 million bag shortfall in 2025/26.
As of the publication date, Rich Asplund disclosed no positions in mentioned securities. All information is provided solely for informational purposes according to the Barchart Disclosure Policy.
Arabica coffee prices have risen due to dry weather in Brazil, with significant risks becoming evident as harvest season approaches. Contrarily, robusta prices faced pressures from projected rainfall in Vietnam. Inventory declines and elevated sales percentages from Brazil are also affecting market dynamics. Global coffee production remains uncertain with ongoing drought conditions, impacting both arabica and robusta outputs and maintaining pressure on prices. The coffee market is facing a potential deficit, increasing the need for careful monitoring of weather patterns and export trends.
Original Source: www.tradingview.com
