Arabica coffee prices surged as dry weather in Brazil raised concerns about crop yields. Conversely, robusta prices declined on expected rains in Vietnam. Declining inventories and accelerated sales of Brazilian coffee are influencing market dynamics, while global export forecasts present mixed signals for price stability.
Arabica coffee prices increased as Brazil experienced dry weather, thus raising concerns about potential reductions in crop yields ahead of the May harvest. On Wednesday, May arabica coffee closed at a two-week high, while robusta coffee prices fell slightly due to forecasts of impending rainfall in Vietnam, which would enhance moisture levels and crop yields in that region.
According to Somar Meteorologia, Brazil’s largest arabica coffee-producing region, Minas Gerais, recently received only 24% of its historical average rainfall, suggesting potential adverse impacts on coffee crops in their critical growth stages. As the world’s largest producer of arabica coffee, Brazil’s yield is crucial to global pricing trends.
Further compounding supply concerns, robusta coffee inventory levels monitored by ICE have reached a two-month low, while arabica inventories recently fell to a nine-month low before slightly recovering. This decline in inventories has contributed to the upward pressure on coffee prices in the market.
Notably, Brazilian coffee producers have accelerated sales of the upcoming harvest, with 88% of the 2024/25 crop already sold. Comparatively, last year only 79% had been sold by this time, indicating a tighter supply situation. Conversely, sales of the 2025/26 crop are lagging behind averages, reflecting producer hesitance to release more coffee.
The report from Cecafe indicated a year-over-year decline in Brazil’s January coffee exports, and Conab projected drops in future coffee production estimates, suggesting ongoing challenges within Brazil’s coffee sector. Additionally, consistent below-average rainfall linked to El Nino conditions has raised concerns about long-term damage to coffee trees in South and Central America.
Despite global exports suggesting an ample supply could lower prices, mixed signals exist within Brazil and Vietnam’s coffee markets. The USDA forecasts increases in global coffee production for 2024/25, but Brazil’s production estimates have been adjusted downward due to adverse weather effects.
Volcafe predicts a significant global coffee shortage in 2025/26, estimating an arabica deficit of 8.5 million bags. Market forecasts reflect a continual concern regarding coffee supply constraints, which may lead to sustained higher prices amid ongoing climatic challenges affecting production seasons.
In conclusion, the current climate in Brazil is projected to negatively affect coffee crop yields, leading to increased arabica coffee prices. Simultaneously, while robusta prices face downward pressure due to expected rainfall in Vietnam, global and regional supply forecasts paint a mixed picture. The situation necessitates ongoing monitoring of weather patterns and harvest reports to evaluate the overall impact on coffee markets.
Original Source: www.tradingview.com
