Rising Coffee Prices Driven by Brazilian Weather and Dollar Trends
Coffee prices have risen due to lower rainfall in Brazil and a declining dollar. Increased inventories pose potential bearish trends, but supply constraints and adverse weather enhance price support. Future forecasts for global coffee production remain uncertain, especially concerning Brazil’s coffee crops.
Current coffee prices have experienced a rise, attributed to below-average rainfall impacting Brazil, particularly the Minas Gerais region, which received only 2% of its historical rainfall average. As of today, May arabica coffee is up 1.59%, while robusta coffee has increased by 3.18%. Concurrently, the dollar index has dropped to a four-and-a-half month low, further supporting high coffee prices.
A significant factor affecting prices is the increase in coffee inventories, with ICE-monitored arabica and robusta inventories reaching one-week and one-month highs, respectively. Market forecasts are predicting a global coffee surplus in the 2025/26 season, expanding to 1.2 million bags. This expectation poses a bearish outlook, especially for robusta coffee, following Vietnam’s reported increase in coffee exports.
Supply concerns continue to bolster coffee prices as reports indicate a decline in Brazil’s January green coffee exports and forecasts for decreased coffee crop yields. Brazil’s coffee production for 2025/26 is projected to fall due to ongoing drought conditions since April of last year, consequently limiting crop recovery, particularly in the flowering stage.
Robusta coffee prices are facing downward pressure as production drops by 20% in Vietnam due to adverse weather conditions. Yet, recent estimates suggest a slight increase in Vietnam’s coffee production for the upcoming season, despite fewer exports compared to last year. In contrast, Brazil’s robust coffee export levels hit record highs in 2024, while global exports show a mixed trend.
The USDA’s biannual report presents a nuanced projection for coffee prices, suggesting growth in world coffee production for 2024/25 but lower ending stock forecasts. These changes reflect Brazil’s anticipated yield declines attributed to extended drought conditions. Furthermore, Volcafe has revised estimates for Brazil’s 2025/26 arabica coffee production downward, forecasting a continuing global deficit in this market.
In conclusion, the rise in coffee prices is predominantly driven by adverse weather conditions in Brazil and a weakening dollar. Although inventory increases and projected global surpluses present bearish trends, ongoing supply concerns and decreased robusta production continue to support prices. The outlook for future coffee production remains uncertain, compounded by climate impacts and changing export patterns from key producing countries.
Original Source: www.tradingview.com
