Arabica Coffee Climbs to Two-Week High Amid Brazil Crop Concerns
Arabica coffee prices have reached a two-week high amid concerns over Brazil’s insufficient rainfall affecting crops. Meanwhile, robusta coffee inventories have increased, contributing to a price decrease. Projections regarding global coffee production and exports indicate potential long-term challenges, particularly due to drought conditions in major producing regions, while forecasts predict widening deficits in future harvests.
On Thursday, May arabica coffee (KCK25) concluded at a two-week high, rising by +1.10 (+0.28%), while May ICE robusta coffee (RMK25) decreased by -30 (-0.548%). Concerns regarding Brazil’s insufficient rainfall are driving arabica prices upward, with Somar Meteorologia reporting only 30.8 mm of rain in Minas Gerais, representing 71% of the historical average for that week. Additionally, Cooxupe, Brazil’s largest arabica cooperative, has indicated that high temperatures and below-average rainfall may detrimentally impact coffee yields this year.
Conversely, robusta coffee experienced a decline, failing to maintain its initial gains due to increasing inventories. ICE-monitored robusta coffee stocks reached a one-and-a-half-week high of 4,336 lots. Meanwhile, arabica coffee inventories fell to a one-month low of 782,489 bags, heightening fears over supply shortages and bolstering coffee prices. Cecafe has reported a 12% year-over-year decline in Brazil’s green coffee exports for February, amounting to 3 million bags, while Conab has revised Brazil’s 2024 coffee crop estimate downward by 1.1%.
On a broader scale, projections from Marex Solutions indicate a potential increase in the global coffee surplus for the 2025/26 season, predicting it may widen to 1.2 million bags. Furthermore, a report from Vietnam highlighted a 6.6% year-over-year rise in coffee exports for February, emphasizing Vietnam’s leading role in robusta coffee production. The persistent dry conditions attributed to El Nino may result in long-term agricultural damage in South and Central America, jeopardizing the prospects for Brazil’s 2025/26 arabica coffee crop.
Drought has severely impacted Vietnam’s coffee production, which is expected to decline to 1.472 million metric tons for 2023/24, marking a 20% drop. The USDA has also projected a slight decrease in robusta production for 2024/25. Studies show a significant reduction in Vietnam’s coffee exports for 2024. Although global coffee exports have increased, suggesting bearish trends, Conab announced record coffee exports in Brazil for 2024, indicating robust market activity.
The USDA’s December report forecasts an increase in world coffee production for 2024/25, with a 4% rise overall, albeit with altered projections regarding Brazil’s output. Volcafe recently revised its forecast for Brazil’s arabica production for the 2025/26 marketing year, downgrading it by 11 million bags due to drought severity. The outlook foresees a global arabica coffee deficit widening further, which may continue for the fifth consecutive year.
Any trading decisions based on this article should consider that Rich Asplund did not possess any related positions at the time of publication. This article is intended solely for informational purposes and should be evaluated accordingly. For further information, please refer to the Barchart Disclosure Policy.
In conclusion, the coffee market is currently marked by concerns over Brazil’s drought conditions affecting arabica coffee yields, leading to a recent surge in prices. While arabica inventories have decreased, robusta prices are influenced by rising supplies. Reports indicate a global shift in coffee production and export forecasts, reflecting ongoing volatility in the market. As projections for production deficits increase, stakeholders should remain vigilant regarding supply and demand dynamics in the coffee sector.
Original Source: www.nasdaq.com
