Forecasted rains in Brazil are expected to help alleviate dryness concerns, leading to a decrease in coffee prices, notably arabica. Increased inventories and projected global coffee surpluses further contribute to downward price pressure. Meanwhile, longstanding production issues due to drought could impact future coffee supply.
The May arabica coffee prices have experienced a slight downturn, decreasing by 0.23% to reach a 1-1/2 week low. Simultaneously, May ICE robusta coffee has dropped by 0.40%. These changes in prices are largely attributed to forecasted widespread rain in Minas Gerais, Brazil, which is expected to alleviate existing dryness concerns among producers.
Supply concerns surrounding coffee have also been eased due to an increase in ICE coffee inventories, with arabica coffee stocks rising to a one-week high of 803,032 bags. Robusta coffee inventories increased to a one-month high, reaching 4,356 lots, contributing further pressure on prices.
Additional bearish sentiments for robusta coffee stem from a report by Marex Solutions that indicates a potential global coffee surplus of 1.2 million bags for the 2025/26 season, significantly higher than the previous season’s surplus of 200,000 bags. Furthermore, the Vietnam General Statistics Office reported a 6.6% increase in Vietnam’s coffee exports year-on-year, which highlights the ample supply of robusta coffee.
On the other hand, reports of below-normal rainfall in key coffee growing areas of Brazil have created some support for prices. This past week, areas in Minas Gerais received only 1.1 mm of rain, representing 2% of the historical average. This weather pattern raises concerns about potential crop damage.
In regard to export data, Brazil’s green coffee exports saw a decline of 1.6% to 3.98 million bags in January, which reflects continued supply apprehensions amid a forecasted drop in the country’s coffee crop for the upcoming season.
Long-term prospects for the Brazilian coffee crop remain uncertain due to the impacts of last year’s El Niño, which has caused persistent dry conditions, affecting the flowering stage crucial for coffee development. Colombia, another major producer, is also gradually recovering from a drought.
Robusta coffee prices maintain some support due to reduced production levels in Vietnam, where drought has contributed to a 20% decrease in coffee output for the 2023/24 crop year. Forecasts suggest that this trend is set to continue, with expected coffee exports from Vietnam declining significantly.
Overall, news regarding global coffee exports appears bearish, as conflicting reports indicate record increases in Brazilian exports alongside declines in overall global exports, suggesting a complex market dynamic. The USDA’s projections indicate a moderate increase in world coffee production, with a slight dip in Brazilian production estimates.
The latest projections from Volcafe confirm a significant reduction in Brazil’s arabica coffee production for 2025/26, indicating a potential deficit in the global market, compounding existing concerns for producers and stakeholders in the coffee industry.
In summary, Brazilian coffee prices are pressured by forecasted rains that soothe dryness worries and increased stock inventories. The potential for a global coffee surplus looms due to rising production projections and exports from rival coffee producers like Vietnam. However, long-term production challenges stemming from drought and adverse weather conditions are expected to create fluctuations in the market. Additionally, uncertainty around supply could lead to continued price volatility in the coffee sector.
Original Source: www.tradingview.com
