Arabica Coffee Prices Supported by Dry Weather Conditions in Brazil
Arabica coffee prices have risen due to dry conditions in Brazil, which may harm crop yields. In contrast, robusta prices decreased based on favorable weather forecasts for Vietnamese crops. Supply concerns are intensified by reduced inventories, increased coffee sales in Brazil, and adverse weather impacts on future production. While global exports have risen, supply fears persist amid projections of potential crop deficits.
Arabica coffee prices have recently surged, closing at +2.90% on Wednesday, attributed to adverse dry weather conditions in Brazil which threaten coffee crop yields. According to Somar Meteorologia, the dry weather predicted for the rest of the week may negatively impact the final development stages of Brazilian coffee crops, as harvest season approaches in May.
Robusta coffee, on the other hand, experienced a slight decline as forecasts predict abundant rainfall in Vietnam, expected to enhance soil moisture and improve robusta coffee yields. Reports indicate daily rain chances for Vietnam’s Central Highlands, noted as the country’s primary coffee-growing region, potentially bolstering robusta crop productivity.
Brazil’s coffee-producing state, Minas Gerais, received only 11.4 mm of rainfall during the week ending February 22, significantly below the historical average. This limited rainfall has raised concerns about potential crop damage. Brazil remains the leading global producer of arabica coffee, and any significant changes in its production can influence global coffee markets.
Supporting prices, coffee inventories monitored by ICE have seen declines, with robusta coffee stocks reaching a two-month low of 4,247 lots. Likewise, arabica coffee inventories fell to a 9¼-month low but have since recovered to a two-week high, further intensifying market dynamics.
The market is experiencing reduced supply due to a faster pace of coffee sales in Brazil. As of February 11, producers sold 88% of the 2024/25 coffee harvest, outperforming last year’s 79% and the five-year average of 82%. However, only 13% of the 2025/26 crop has been sold, indicating a potential scarcity in future supply.
Recent months have shown declining export figures from Brazil, with a noted decrease in January’s green coffee exports by -1.6% year-on-year. Additionally, Brazil’s government crop forecasting agency projects a reduction in the 2025/26 coffee crop, forecasting it to drop by -4.4%. This reduction could heighten tensions regarding supply sustainability.
The ongoing effects of drought aggravated by El Niño conditions have fundamentally impacted coffee crops across South and Central America. Rainfall levels have been consistently low in Brazil since last April, adversely affecting arabica coffee crops, as Colombia also grapples with recovery from previous drought conditions.
Robusta prices are buoyed due to diminished production in Vietnam, which witnessed a -20% reduction in the 2023/24 crop yield, while exports also took a hit. Despite this, Vietnamese authorities recently revised their production estimates upward, suggesting ongoing uncertainty in robusta coffee supply dynamics.
Conversely, there are warnings that larger global coffee exports could place downward pressure on prices. Brazil’s 2024 coffee exports have increased significantly, but global exports appear to be declining overall. In December, the International Coffee Organization noted a -12.4% year-on-year decline in global coffee exports.
The USDA has provided a mixed review of future coffee production scenarios, projecting a 4% year-on-year increase for 2024/25. However, Brazil’s upcoming production estimates remain cautious due to ongoing adverse weather patterns, with substantial cuts in projected output underscoring future supply vulnerabilities.
As of December, projections indicated a persistent deficit in arabica coffee supplies, with the forecasted shortfall for the 2025/26 season being considerably larger than the previous year’s. These conditions may cement a continued bullish environment for arabica coffee prices moving forward in responding to both supply limitations and shifting global demand.
In summary, arabica coffee prices are currently being bolstered by dry weather conditions in Brazil, posing risks to crop yields. While robusta coffee is influenced by the outlook for favorable weather in Vietnam, overall supply concerns remain prevalent. Despite some increases in export volumes, declining inventories, heightened selling rates in Brazil, and adverse weather conditions indicate possible continued price volatility in both arabica and robusta markets. Stakeholders should remain vigilant about these developing trends as they have the potential to significantly impact future pricing and availability.
Original Source: www.tradingview.com
