Coffee prices rose on Monday, boosted by drought in Brazil and a strong Brazilian real. Key forecasts indicate a rise in global coffee production for 2024/25 but a decline in Brazilian coffee stocks and production estimates due to drought conditions that imply a longer-term deficit in arabica coffee availability.
On Monday, coffee prices experienced a slight increase with May arabica coffee (KCK25) rising by +1.64% or +5.20, and May ICE robusta coffee (RMK25) gaining +1.43% or +77. The rise was influenced by dry weather conditions impacting Brazil and the strengthening of the Brazilian real.
Somar Meteorologia reported that Brazil’s primary arabica coffee-growing region, Minas Gerais, received only 30.8 mm of rain during the week ending March 15, which is significantly lower than the historical average of 71%. Projections indicate a +4.0% year-over-year global coffee production increase for 2024/25 to 174.855 million bags, including a +1.5% rise in arabica and a +7.5% increase in robusta coffee output.
The USDA’s Foreign Agricultural Service (FAS) anticipates a 6.6% decline in ending coffee stocks to a 25-year low of 20.867 million bags by the end of the 2024/25 fiscal year, down from 22.347 million bags in 2023/24. Moreover, the FAS revised Brazil’s coffee production forecast to 66.4 million metric tons for 2024/25, marking a decrease from 69.9 million metric tons in previous estimates.
For the 2025/26 marketing period, Volcafe has lowered its estimate for Brazil’s arabica coffee production to 34.4 million bags, roughly 11 million bags below earlier estimates due to drought conditions. Volcafe further predicts a global arabica coffee deficit of -8.5 million bags for 2025/26, an increase compared to the -5.5 million bag deficit expected for 2024/25, indicating ongoing supply challenges for coffee over several years.
In summary, coffee prices increased due to adverse weather conditions in Brazil and a strong Brazilian real, prompting forecasts of reduced coffee production and lower global inventories. The expected impacts of drought on future production, alongside ongoing deficits in arabica coffee, highlight significant trends in the coffee market that could influence prices and availability in coming years.
Original Source: www.tradingview.com
