On Monday, coffee prices rose with May arabica up 1.64% and robusta up 1.43%, driven by Brazil’s dry conditions and a strong Brazilian real. Projections indicate a rise in global coffee production for 2024/25, while ending stocks are expected to hit a 25-year low.
On Monday, May arabica coffee (KCK25) increased by +5.20 (+1.64%), while May ICE robusta coffee (RMK25) rose by +77 (+1.43%). The uptick in coffee prices is attributed to dry weather conditions in Brazil and a strengthening Brazilian real, which provided favorable market support. According to Somar Meteorologia, Minas Gerais, Brazil’s primary arabica coffee production region, recorded only 30.8 mm of rainfall during the week ending March 15, amounting to 71% of the historical average.
The Brazilian real’s strength coincided with projections from the Brazilian Coffee Industry Association, predicting a 4% increase in global coffee production for 2024/25, totaling 174.855 million bags. This forecast includes a 1.5% rise in arabica production, estimated at 97.845 million bags, alongside a more significant 7.5% increase in robusta production, reaching 77.01 million bags. The USDA’s Foreign Agricultural Service (FAS) anticipates 2024/25 ending stocks to decline by 6.6% to 20.867 million bags, marking a 25-year low.
Additionally, the USDA’s FAS previously projected Brazil’s 2024/25 coffee production at 66.4 million metric tons, reduced from an earlier estimate of 69.9 million metric tons. For the 2025/26 marketing year, Volcafe has revised its estimate for Brazil’s arabica coffee production down to 34.4 million bags, representing a decrease of approximately 11 million bags from previous estimates due to a prolonged drought. This adjustment suggests a potential global arabica coffee deficit of 8.5 million bags for 2025/26, which surpasses the projected deficit of 5.5 million bags for 2024/25 and indicates the risk of deficits persisting for five consecutive years.
The recent increase in coffee prices is primarily due to adverse weather conditions in Brazil and the strength of the Brazilian real. Current forecasts indicate a rise in global coffee production amid declining ending stocks, raising concerns about potential deficits in future years. The adjustments in production estimates reflect the challenges presented by drought conditions, emphasizing the ongoing volatility in the coffee market.
Original Source: www.tradingview.com
