Coffee prices are rising on the back of drier conditions in Brazil and a stronger Brazilian real, with May arabica coffee up 2.05% and May robusta coffee up 1.89%. Brazil’s leading coffee region received only 71% of its normal rainfall. Projections show an increase in global coffee production but significant declines in Brazilian output and inventories, leading to a forecasted coffee deficit for 2025/26.
Coffee prices are experiencing a moderate increase, bolstered by dry weather conditions in Brazil and a strengthening Brazilian real. Specifically, May arabica coffee (KCK25) rose by 2.05%, while May ICE robusta coffee (RMK25) increased by 1.89%. Reports indicate that Brazil’s leading arabica-growing region, Minas Gerais, garnered only 30.8 mm of rainfall, amounting to only 71% of the historical average for the week ending March 15.
For the 2024/25 coffee season, projections indicate a global increase in coffee production by 4.0% year-on-year, totaling 174.855 million bags, with arabica climbing to 97.845 million bags and robusta reaching 77.01 million bags. However, the USDA’s Foreign Agricultural Service forecasts that ending stocks will decline by 6.6%, reaching a 25-year low at 20.867 million bags.
On a recent update, the USDA noted a lowered expectation for Brazil’s coffee production at 66.4 MMT for the 2024/25 season, down from a prior estimation of 69.9 MMT. The anticipated coffee inventories in Brazil are projected to drop by 26% year-on-year, concluding the 2024/25 season with just 1.2 million bags.
Looking further ahead to the 2025/26 marketing year, Volcafe revised its projections estimating Brazil’s arabica coffee yield at 34.4 million bags, a reduction of approximately 11 million bags since September. This adjustment follows insights from a crop tour revealing the extent of drought conditions in Brazil. The outlook suggests a global arabica coffee deficit of 8.5 million bags, an increase compared to the previous year’s deficit of 5.5 million bags, marking the fifth consecutive year of deficits.
In summary, coffee prices are climbing due to adverse weather conditions in Brazil and a strong Brazilian real. While production estimates for 2024/25 indicate a growth in global coffee supply, significant drops in Brazilian output and stocks point towards continued scarcity. The prolonged drought in Brazil poses serious implications for future harvests, particularly impacting arabica coffee.
Original Source: www.tradingview.com
