Coffee prices are rising on account of drought in Brazil and the stronger Brazilian real, with May arabica and robusta prices both increasing. World coffee production is expected to see a slight rise, but decreasing inventories and drought are causing production estimates to be revised downward, indicating potential deficits.
Coffee prices have seen an increase due to drought conditions in Brazil and the strengthening of the Brazilian real. Specifically, May arabica coffee prices rose by 2.05%, while robusta coffee prices increased by 1.89%. According to Somar Meteorologia, the Minas Gerais region, which is Brazil’s largest arabica coffee area, received only 30.8 mm of rain during the week ended March 15, which is significantly below the historical average at 71%.
Forecasts indicate that world coffee production for the 2024/25 season is expected to rise by 4% year-on-year, totaling 174.855 million bags. Arabica production is projected to increase by 1.5% to 97.845 million bags, while robusta production may rise by 7.5% to reach 77.01 million bags. However, the USDA’s Foreign Agricultural Service anticipates that ending stocks for 2024/25 will decline by 6.6%, reaching a 25-year low of 20.867 million bags compared to 22.347 million bags in 2023/24.
In light of ongoing drought conditions, Volcafe revised its Brazil arabica coffee production estimate for the 2025/26 marketing year down to 34.4 million bags, a reduction by approximately 11 million bags from earlier projections. The organization has also highlighted a potential global deficit in arabica coffee for the 2025/26 season of 8.5 million bags, which would mark a continued trend of deficits for the fifth consecutive year.
In summary, coffee prices are experiencing upward pressure due to adverse weather conditions in Brazil and favorable currency strength. Forecasts suggest a minor increase in global coffee production, yet falling inventories could indicate a tightening market. The anticipated significant production deficits for future marketing years further emphasize the potential challenges that may arise in the coffee sector.
Original Source: www.tradingview.com
