Weakness in the Brazilian Real Affects Coffee Market Trends

Recent market analysis indicates a decrease in coffee prices, with May arabica coffee down -0.70% and robusta coffee down -0.43%. Forecasts suggest a 4.0% increase in global coffee production for 2024/25, but lower estimates for Brazil’s production may impact future supply.

The May arabica coffee (KCK25) is currently down by -0.70 (-0.19%), while May ICE robusta coffee (RMK25) has decreased by -23 (-0.43%). Recent fluctuations in coffee prices have seen a reversal from early gains, primarily due to the depreciation of the Brazilian real and updated production forecasts

According to projections, global coffee production for the 2024/25 period is expected to rise by +4.0% year-on-year, reaching 174.855 million bags. This includes a +1.5% increase in arabica production, bringing it to 97.845 million bags, and a +7.5% uptick in robusta production to 77.01 million bags. Furthermore, the USDA’s Foreign Agricultural Service (FAS) has forecasted a decline in ending stocks to a 25-year low of 20.867 million bags for the 2024/25 season.

In a separate forecast dated November 22, the USDA’s FAS estimated that Brazil’s coffee production for the 2024/25 season will be 66.4 million metric tons, a reduction from the previously anticipated 69.9 million metric tons. Brazil’s coffee inventories are projected to decline -26% year-on-year, totaling 1.2 million bags by the end of the 2024/25 season in June.

Volcafe, as of December 17, revised down its 2025/26 Brazilian arabica coffee production estimate to 34.4 million bags, representing an 11 million bags reduction from its September figure. This adjustment comes after a crop tour indicated severe drought conditions affecting Brazil’s coffee yield. Volcafe also predicts a global arabica coffee deficit for the 2025/26 marketing year of -8.5 million bags, larger than the -5.5 million bag deficit estimated for 2024/25 and marking the fifth consecutive year of deficits.

In conclusion, current market conditions indicate a trend of decreasing coffee prices, influenced by fluctuations in the Brazilian real and revised production forecasts. The anticipated increases in global coffee production and decreasing Brazilian output hint at future market dynamics that stakeholders must closely monitor. Continued drought conditions could exacerbate supply challenges, particularly for arabica coffee.

Original Source: www.tradingview.com