Brazil’s Crop Concerns and Real Strength Influence Rising Coffee Prices
Coffee prices are on the rise due to dry conditions in Brazil and the strengthening of the Brazilian real. Projections indicate a potential increase in global coffee production but also a significant decline in inventories. Concerns remain about deficits in arabica coffee supply moving forward.
Coffee prices experienced a moderate increase today, with May arabica coffee rising by 0.76% and May ICE robusta coffee increasing by 0.35%. These price elevations are attributed to prolonged dry conditions in Brazil and the strengthening of the Brazilian real, enhancing the overall market sentiment. According to Somar Meteorologia, Brazil’s primary arabica coffee area, Minas Gerais, received only 30.8 mm of rain in the week ending March 15, which represents just 71% of the historical average rainfall.
Looking ahead, projections indicate a 4.0% increase in world coffee production for the 2024/25 season, totaling 174.855 million bags. This includes a 1.5% rise in arabica production to reach 97.845 million bags and a 7.5% increase in robusta production, hitting 77.01 million bags. However, the USDA’s Foreign Agricultural Service anticipates that the ending stocks for 2024/25 will decline by 6.6%, reaching a 25-year low of 20.867 million bags, down from 22.347 million bags in 2023/24.
The USDA’s FAS had previously estimated Brazil’s coffee production for 2024/25 at 66.4 million metric tons, a reduction from the earlier forecast of 69.9 million metric tons. The forecast shows Brazil’s coffee inventories standing at approximately 1.2 million bags at the close of the 2024/25 season in June, marking a 26% year-over-year decrease.
For the marketing year 2025/26, Volcafe revised its Brazil arabica coffee production estimate to 34.4 million bags, representing a drop of roughly 11 million bags from its prior assessment in September. This adjustment follows insights gained from a crop tour, which highlighted the impact of an extended drought. The anticipated global arabica coffee deficit for 2025/26 is projected to reach 8.5 million bags, exceeding the previously estimated deficit of 5.5 million bags for 2024/25, thereby continuing a trend of five consecutive years of deficits.
In summary, coffee prices are bolstered by drought conditions in Brazil and the robust performance of the Brazilian real. While global coffee production is projected to rise, inventories are forecasted to decline significantly. These dynamics suggest ongoing challenges for producers, especially with projected deficits in future coffee supplies. Stakeholders in the coffee industry must remain vigilant about climatic factors and market trends affecting production and pricing.
Original Source: www.tradingview.com
