Insufficient Rain in Brazil Boosts Coffee Prices Amid Market Projections
Insufficient rainfall in Brazil is driving up coffee prices, with May arabica and robusta coffee closing higher. Projections for global coffee production suggest increases, despite lowered expectations for Brazil’s output due to drought. The USDA forecasts a significant drop in Brazil’s coffee inventories, indicating ongoing challenges in the sector.
Coffee prices experienced moderate increases due to insufficient rainfall in Brazil and the robust performance of the Brazilian real. On Wednesday, May arabica coffee closed up by 1.89% while May ICE robusta coffee rose by 1.06%. Reports from Somar Meteorologia indicated that Minas Gerais, Brazil’s largest arabica coffee-producing region, received only 30.8 mm of rain, which is 71% of its historical average for the period ending March 15.
Furthermore, projections indicate a 4% year-over-year increase in global coffee production for 2024/25, totaling 174.855 million bags. Of this, arabica production is anticipated to rise by 1.5% to 97.845 million bags, while robusta production could see a 7.5% increase to 77.01 million bags. In a related note, the USDA’s Foreign Agricultural Service (FAS) forecasts a decrease of 6.6% in coffee ending stocks, dropping to a 25-year low of 20.867 million bags from 22.347 million bags in the previous market year.
In a noteworthy adjustment, the USDA’s FAS, as of November 22, revised Brazil’s coffee production estimate for 2024/25 down to 66.4 million metric tons (MMT), a reduction from the earlier forecast of 69.9 MMT. The agency also anticipates Brazil’s coffee inventories will decline to 1.2 million bags by the conclusion of the 2024/25 season, reflecting a 26% annual decrease.
Volcafe, on December 17, reduced its forecast for Brazil’s arabica coffee production for the 2025/26 marketing year to 34.4 million bags, a significant downward adjustment of about 11 million bags from previous estimations. This revision follows insights gained from a crop tour that revealed the impactful severity of an ongoing drought in Brazil. Furthermore, Volcafe expects a global deficit of 8.5 million bags of arabica coffee for the 2025/26 season, marking the fifth consecutive year of such deficits, exceeding the prior year’s deficit of 5.5 million bags.
Insufficient rainfall in Brazil is exerting upward pressure on coffee prices, as evidenced by recent market gains. Projections indicate a rise in global coffee production in the upcoming years, despite significant reductions in Brazil’s forecasts due to adverse weather conditions. As Brazil’s coffee inventories dwindle and deficits become increasingly notable, the impacts on global prices may continue to intensify.
Original Source: www.tradingview.com
