Coffee prices are rising due to dry weather in Brazil and a stronger Brazilian real. While global coffee production is expected to increase for 2024/25, forecasts from the USDA suggest a decrease in Brazil’s production estimates and ending stocks, raising concerns about future supply.
Coffee prices are experiencing moderate increases, particularly for May arabica and robusta varieties, reflecting a rise of 0.76% and 0.35% respectively. This uptick is attributed to adverse dry conditions in Brazil and the strengthening of the Brazilian real. Notably, Somar Meteorologia indicated that the Minas Gerais region, Brazil’s largest arabica coffee production area, received only 30.8 mm of rain during the week ending March 15, amounting to 71% of its historical average.
The Brazilian Economic Commission forecasts a 4.0% year-on-year increase in global coffee production for the 2024/25 season, reaching 174.855 million bags. This forecast includes a 1.5% rise in arabica production, totaling 97.845 million bags, and a 7.5% increase in robusta production, amounting to 77.01 million bags. Conversely, the USDA’s Foreign Agricultural Service predicts a 6.6% decline in ending stocks for 2024/25, down to 20.867 million bags from 22.347 million bags in 2023/24.
In light of prolonged drought conditions, Volcafe has revised down its 2025/26 Brazil arabica coffee production estimate to 34.4 million bags, a drop of approximately 11 million bags from earlier forecasts. This information emerged following a crop tour that revealed significant drought impacts. Volcafe anticipates a global deficit of arabica coffee will expand to 8.5 million bags for the 2025/26 marketing year, marking the fifth consecutive year of deficits.
In conclusion, current coffee prices are buoyed by adverse weather conditions in Brazil and a stronger Brazilian real, despite predictions of increasing global coffee production. While the Brazilian Economic Commission anticipates higher production levels, forecasts from the USDA and Volcafe suggest declining inventories and lower coffee production estimates due to drought, indicating potential challenges ahead for the coffee market.
Original Source: www.tradingview.com
