Coffee prices are rising due to dry conditions in Brazil and a strong Brazilian real. Projections for 2024/25 indicate increased global coffee production, but Brazil’s output forecasts have been downgraded significantly due to drought, leading to potential deficits in coffee inventories.
Coffee prices have shown a modest increase, with May arabica coffee rising by 0.76% and May ICE robusta coffee increasing by 0.35%. This rise is attributed to dry weather conditions in Brazil and the strengthening of the Brazilian real. According to Somar Meteorologia, Brazil’s primary arabica coffee region, Minas Gerais, received only 71% of the historical average rainfall during the week ending March 15.
The Brazilian real is projected to impact global coffee production positively, with an expected increase of 4% year-on-year, totaling 174.855 million bags for the 2024/25 season. Specifically, arabica production is anticipated to rise by 1.5% to 97.845 million bags, while robusta coffee production is projected to increase by 7.5% to 77.01 million bags. However, the USDA’s Foreign Agricultural Service (FAS) forecasts that ending stocks for the 2024/25 season will decline by 6.6% to a 25-year low.
In its November 22 report, the USDA’s FAS revised Brazil’s coffee production for the 2024/25 season to 66.4 million metric tons, a reduction from the previous estimate of 69.9 million metric tons. Coffee inventories in Brazil are projected to decrease by 26% year-on-year at the end of the 2024/25 marketing season.
Volcafe has also lowered its estimates for Brazil’s arabica coffee production for the 2025/26 marketing year to 34.4 million bags, indicating a significant drop due to extensive drought conditions. This change results in a predicted global arabica coffee deficit of 8.5 million bags for 2025/26, marking the fifth consecutive year of deficits in this sector.
On the date of publication, Rich Asplund did not have positions in any of the securities mentioned in this article. All information is provided for informational purposes, and further details can be found in the Barchart Disclosure Policy.
Coffee prices are experiencing a rise due to dry weather in Brazil and the strengthening of the Brazilian real. While global production forecasts indicate increases, Brazil’s coffee production estimates have been adjusted downward due to drought. This trend points to a concerning forecast for coffee stocks and production deficits in the coming years, emphasizing the impact of climate conditions on the coffee market.
Original Source: www.tradingview.com
