Coffee prices are experiencing a rise due to dry conditions in Brazil and a stronger Brazilian real. Projections indicate an increase in global coffee production for 2024/25, while Brazil’s own production and inventories are anticipated to decrease significantly. The situation for 2025/26 looks even more concerning, with further reductions expected in arabica production.
May arabica coffee prices have increased by $2.90 or 0.76%, while May ICE robusta coffee has risen by $19 or 0.35%. This upward movement in coffee prices is attributed to dry conditions in Brazil and the strengthening of the Brazilian real. According to Somar Meteorologia, Brazil’s primary arabica coffee region, Minas Gerais, received only 30.8 mm of rain in the week ending March 15, significantly lower than the historical average of 71%.
The Brazilian real has influenced forecasts for global coffee production, which is expected to rise by 4% year-over-year in 2024/25 to reach 174.855 million bags. Projections include a 1.5% increase in arabica production to 97.845 million bags and a 7.5% rise in robusta production to 77.01 million bags. The USDA’s Foreign Agricultural Service (FAS) also predicts that ending stocks for 2024/25 will decline by 6.6% to a 25-year low of 20.867 million bags, down from 22.347 million bags in the preceding year.
In an additional report on November 22, the USDA’s FAS projected Brazil’s coffee production for 2024/25 at 66.4 million metric tons, a reduction from an earlier estimate of 69.9 million metric tons. The forecasted coffee inventories in Brazil are expected to drop to 1.2 million bags by the end of the 2024/25 season in June, reflecting a 26% year-on-year decrease.
Volcafe has revised its estimate for Brazil’s arabica coffee production for the 2025/26 marketing year to 34.4 million bags, a reduction of about 11 million bags from September’s forecast due to the ongoing drought conditions. This has led to a projected global arabica coffee deficit of 8.5 million bags for 2025/26, surpassing the previous year’s deficit of 5.5 million bags and marking the fifth consecutive year of deficits.
In summary, concerns regarding Brazil’s coffee crop due to dry weather and the strengthening Brazilian real have driven prices higher. Forecasts indicate a modest increase in world coffee production for 2024/25, but the USDA projects a decrease in Brazil’s production and inventories. The situation may worsen for the 2025/26 marketing year, with significant reductions in arabica production expected, emphasizing the prevailing supply challenges in the coffee market.
Original Source: www.tradingview.com
