Coffee prices rose today due to dry conditions in Brazil and a stronger Brazilian real. Forecasts indicate an increase in global coffee production for 2024/25, yet lower ending stocks and significant deficits are projected for subsequent years. The situation underscores potential challenges for coffee supply amid adverse weather conditions in Brazil.
On May 25, arabica coffee prices increased by 2.05% and robusta coffee prices rose by 1.89%, influenced by adverse weather in Brazil and the strengthening of the Brazilian real. According to Somar Meteorologia, the crucial arabica region of Minas Gerais received only 30.8 mm of rain, which is 71% of its average for the week ending March 15.
Projections for global coffee production in 2024/25 indicate a year-over-year increase of 4.0%, totaling 174.855 million bags. This includes a 1.5% rise in arabica production to 97.845 million bags and a more significant 7.5% increase in robusta production to 77.01 million bags. Notably, the USDA’s Foreign Agricultural Service (FAS) anticipates a 6.6% decrease in ending stocks for 2024/25, marking the lowest levels in 25 years.
Additionally, a recent USDA announcement has adjusted Brazil’s coffee production forecast for 2024/25 down to 66.4 million metric tons, a decline from previous estimates. Brazil’s coffee inventories are projected to decrease by 26% year-over-year, ending 2024/25 at 1.2 million bags.
For the 2025/26 marketing year, Volcafe revised its estimate for Brazil’s arabica production, reducing it to 34.4 million bags, which reflects the impact of significant drought conditions. Furthermore, Volcafe anticipates a global arabica coffee deficit of 8.5 million bags for 2025/26, indicative of a supply issue continuing from previous years.
It is noteworthy that on the date of publication, Rich Asplund had no positions in any mentioned securities. The information provided is for informational purposes only and should be viewed in conjunction with the Barchart Disclosure Policy.
In conclusion, coffee prices are rising due to dry conditions impacting Brazil’s coffee production and strengthening local currency dynamics. Projections for increased global production in the near future contradict expectations of reduced stocks and significant deficits anticipated in the coming marketing years. Stakeholders should remain vigilant in light of these developments, particularly regarding Brazil’s production forecasts during periods of drought.
Original Source: www.tradingview.com
