Coffee prices rose on Monday due to dry weather in Brazil and a stronger Brazilian real. May Arabica and robusta coffee prices increased by 1.64% and 1.43%, respectively. Brazil’s 2024/25 coffee production is expected to rise, but forecasts indicate significant production declines and deficits moving forward.
On Monday, coffee prices exhibited moderate gains influenced by dry weather conditions in Brazil coupled with the strengthening of the Brazilian real. The May Arabica coffee contract (KCK25) increased by 5.20 cents, or 1.64%, while the May ICE robusta coffee (RMK25) rose by 77 cents, or 1.43%. According to Somar Meteorologia, Minas Gerais, the largest Arabica coffee-producing region in Brazil, received only 30.8 mm of rain during the week ending March 15, representing just 71% of the average rainfall expected.
Forecasts indicate a substantial rise in global coffee production for the 2024/25 season, with an estimated increase of 4% year-on-year, bringing production to 174.855 million bags. The projections estimate a 1.5% growth in Arabica production, reaching 97.845 million bags, and a 7.5% increase in robusta production to 77.01 million bags. The USDA’s Foreign Agricultural Service (FAS) anticipates that ending stocks for the 2024/25 season will decline by 6.6%, culminating in a 25-year low of 20.867 million bags.
Furthermore, the USDA revised Brazil’s coffee production forecast for 2024/25 down to 66.4 million metric tons from a prior estimate of 69.9 million metric tons. Coffee inventories in Brazil are projected to fall to 1.2 million bags by the close of the 2024/25 season, reflecting a 26% decrease year-on-year. Looking ahead to the 2025/26 marketing year, Volcafe has significantly reduced its projection for Brazil’s Arabica coffee production to 34.4 million bags, down by approximately 11 million bags from its previous forecast due to ongoing drought conditions impacting the region.
Volcafe also projects an Arabica coffee deficit of 8.5 million bags for the 2025/26 season, exacerbating the challenges faced as this continues a trend of deficits that has persisted for five consecutive years.
In conclusion, coffee prices have risen following unfavorable weather conditions in Brazil along with a strengthening Brazilian real. The projections for global coffee production indicate steady increases, yet Brazil’s coffee output forecasts point to diminishing yields due to persistent drought. These factors may lead to continued market volatility in the coffee sector, especially as deficits compound in future years.
Original Source: www.tradingview.com
