Coffee prices are rising due to dryness in Brazil and a strong Brazilian real; projections indicate increased global production but also significant deficits in arabica coffee.
Current coffee prices are on the rise, buoyed by persistent dry conditions in Brazil and a robust Brazilian real. As of today, May arabica coffee is priced at a notable rise of +7.75 (+2.05%), while May ICE robusta coffee has increased by +102 (+1.89%). Somar Meteorologia reported that Brazil’s largest arabica coffee-producing region, Minas Gerais, recorded only 30.8 mm of rainfall during the week ending March 15, which is only 71% of the historical average for that period.
The Brazilian real has played a crucial role in this surge. According to projections from Brazilian authorities, world coffee production for the 2024/25 year is anticipated to increase by +4.0% year-on-year, totaling 174.855 million bags. There is a +1.5% increase expected in arabica production to reach 97.845 million bags and a further +7.5% increase in robusta production, amounting to 77.01 million bags.
Additionally, the United States Department of Agriculture (USDA) Foreign Agricultural Service (FAS) has forecasted a decline in ending stocks for 2024/25, predicting a reduction of -6.6% down to a 25-year low of 20.867 million bags, compared to 22.347 million bags in 2023/24. Furthermore, separate projections indicate Brazil’s coffee production for the 2024/25 season could drop to 66.4 million metric tons, a decrease from the earlier estimation of 69.9 million metric tons.
In summary, coffee prices are experiencing an upward trend due to unfavorable dry conditions in Brazil and the strength of the Brazilian currency. Projections indicate an increase in both global coffee production and the anticipated deficits in arabica coffee, suggesting potential market volatility. Vigilance regarding these trends will be essential for stakeholders in the coffee industry moving forward.
Original Source: www.tradingview.com
