Coffee prices experienced losses due to rain forecasts for Brazil, with May arabica coffee down 0.71% and May robusta coffee down 1.36%. Vietnamese coffee exports rose 6.6%, while coffee inventories are changing. Concerns over supply persist as significant portions of harvests are committed, with predictions for production declines continuing to affect market stability.
On Friday, coffee prices experienced moderate losses as forecasts for rain in Brazil influenced the market. May arabica coffee (contract KCK25) fell by $2.75 (0.71%), while May ICE robusta coffee (contract RMK25) decreased by $74 (1.36%). According to Somar Meteorologia, Brazil is expected to transition from dry weather to showers next week, alleviating current drought conditions.
Robusta coffee prices are also facing downward pressure following Vietnam’s General Statistics Office reporting a 6.6% increase in coffee exports for February, achieving 169,000 metric tons year-on-year. The anticipated rainfall in Vietnam, particularly in the Central Highlands, where most robusta is produced, adds further weight to these price declines.
In terms of coffee inventories, ICE-monitored robusta stocks rose to a one-month high of 4,356 lots on Friday, which is bearish for prices. Conversely, arabica coffee inventories decreased to 758,514 bags but have rebounded to 809,128 bags as of last Thursday, reflecting a recent upswing.
Recent rain reports from Somar indicate that Brazil’s prominent arabica-producing region, Minas Gerais, received 11.4 mm of precipitation, representing 24% of the historical average during the week ending February 22. The delays in these reports are attributed to the Brazilian Carnival holiday, highlighting the importance of weather in coffee production.
Meanwhile, a significant portion of Brazil’s coffee harvest has been sold, with 88% of the 2024/25 harvest already committed as of mid-February, surpassing last year’s 79% and the five-year average of 82%. However, sales for the 2025/26 crop remain slow, indicating a potential reduction in new supply.
Concerns over supply continue to bolster coffee prices. Reports from Cecafe illustrate a 1.6% year-on-year decrease in Brazil’s January green coffee exports, totaling 3.98 million bags. Moreover, Brazil’s government projected a 4.4% reduction in the 2025/26 coffee crop, leading to further worries about future availability.
In the long term, the impacts of El Nino contribute to ongoing damage to coffee crops across South and Central America. Brazil is presently experiencing the most severe drought since 1981, which poses risks for the burgeoning 2025/26 arabica crop.
Robusta coffee prices remain supported by diminished production as Vietnam confronts a 20% decrease in coffee output for the 2023/24 crop year, reaching its lowest levels in four years. There is a mixed projection for future exports, with recent declines noted in Vietnamese coffee shipments.
Contrasting global coffee export data reveals bearish sentiments; Brazil noted a record increase in 2024 exports by 28.8%, while the International Coffee Organization indicated a drop in global shipments by 12.4% in December compared to the previous year.
The USDA’s biannual report presented a mixed outlook with a predicted 4% increase in world coffee production for 2024/25. Despite increases in quantities for both arabica and robusta, the USDA forecasted a significant decline in ending stocks to a 25-year low.
Volcafe has adjusted its estimates for Brazil’s 2025/26 arabica production down to 34.4 million bags, citing severe drought impacts. They anticipate a coffee deficit extending into the next market year, presenting challenges for growers and traders alike.
In conclusion, coffee prices have been impacted by weather forecasts, supply levels, and inventory changes. While rain predictions for Brazil provide some relief, concerns remain regarding low production levels and potential deficits. Increased sales of the current harvest and a mixed outlook from the USDA further complicate market dynamics, highlighting the ongoing challenges faced by coffee producers amidst climatic adversities.
Original Source: www.tradingview.com
