Arabica coffee prices have risen by 0.28% to reach a two-week high due to drought concerns in Brazil, affecting crop yields. In contrast, robusta coffee prices fell due to increased inventory levels. Brazil’s crop estimates have been downgraded, forecasting a potential coffee shortage in the future as global production faces mixed signals. Long-term drought effects remain a critical concern for coffee production in both Brazil and Colombia.
Arabica coffee prices reached a two-week high as they closed at +1.10 (+0.28%) on May 25, while robusta coffee fell by -30 (-0.548%). The price increase for arabica is attributed to concerns over Brazil’s insufficient rainfall, which threatens coffee crops in key growing regions like Minas Gerais, where only 30.8 mm of rain fell, representing just 71% of the historical average. Additionally, Cooxupe highlighted that high temperatures and reduced rainfall last month might negatively impact coffee yields this year.
In contrast, robusta coffee prices declined after posting earlier gains due to increased supply. ICE-monitored inventories of robusta climbed to a 1.5-week high of 4,336 lots. Meanwhile, arabica coffee inventories decreased to a 1-month low of 782,489 bags. Ongoing supply fears are continuing to support coffee prices amid reports that Brazil’s green coffee exports fell by -12% year-on-year to 3 million bags in February.
Brazil’s crop forecasting agency Conab also revised estimates, predicting a -4.4% year-on-year drop in the 2025/26 coffee crop, which could reach a three-year low of 51.81 million bags. For the 2024 crop, the estimate was cut from 54.8 million bags to 54.2 million bags, reflecting concerns about the ongoing drought conditions.
On a negative note, Marex Solutions reported expectations of a wider global coffee surplus, projecting a surplus of 1.2 million bags in the 2025/26 season compared to just a surplus of 200,000 bags for 2024/25. Additionally, Vietnam’s coffee exports saw a year-over-year increase of +6.6% in February, putting downward pressure on robusta prices.
Long-term impacts from last year’s dry El Niño weather may further harm coffee crops across South and Central America. Brazil is experiencing its lowest rainfall levels since 1981, undermining coffee tree health crucial for flowering and future crops. Colombia, ranked second in arabica production, is also gradually recovering from drought conditions.
Robusta coffee prices remain supported as Vietnam’s production fell by -20% to a four-year low of 1.472 million metric tons in 2023/24. The USDA projects a slight dip in Vietnam’s robusta production for the 2024/25 marketing year, while coffee exports have dropped by -17.1% in early 2024.
Global coffee exports present a mixed picture, with Brazil’s exports in 2024 rising by +28.8% year-on-year to a record high. However, reports from the International Coffee Organization (ICO) indicate a decline in global exports in late 2023, highlighting potential issues ahead.
The USDA’s December report presented a complex outlook with projected increases in world coffee production for 2024/25. However, a fall in ending stocks to a 25-year low suggests tighter supplies moving forward. Details from the USDA predict Brazil’s 2024/25 coffee production at 66.4 million metric tons, lower than initial expectations.
Furthermore, Volcafe adjusted its 2025/26 Brazil arabica coffee production estimate to 34.4 million bags, reflecting the severe drought conditions observed during crop tours. They forecast a projected global arabica coffee deficit of -8.5 million bags in 2025/26, another significant increase from the previous year.
In summary, arabica coffee prices have surged amid concerns over Brazil’s crop yields due to insufficient rainfall and high temperatures. While robusta prices have fallen due to increased inventories and improved export reports from Vietnam, long-standing drought conditions threaten coffee production in major growing regions. Projections indicate decreasing supplies and a widening deficit, emphasizing the complex dynamics impacting coffee markets.
Original Source: www.nasdaq.com
