Coffee prices are rising due to below-normal rainfall in Brazil, impacting crop yields, particularly in Minas Gerais. Tightening inventories and a high percentage of early coffee sales further support prices. However, global coffee export trends and production forecasts present a complex market landscape, warranting close observation.
Coffee prices are experiencing an upward trend due to below-normal rainfall in Brazil, which threatens crop yields. The latest reports indicate that Brazil’s key arabica coffee production region, Minas Gerais, recorded only 11.4 mm of rainfall, significantly below the historical average. As the world’s leading producer of arabica coffee, Brazil’s weather conditions directly affect global coffee prices.
Support for coffee prices is further bolstered by diminishing supplies. Recent data shows that inventories of robusta coffee monitored by ICE fell to a two-month low of 4,247 lots, while arabica coffee stocks decreased to a nine-and-a-quarter month low before somewhat recovering. This tightening of inventories contributes to the price increase.
Producers in Brazil are selling a greater percentage of their coffee harvest earlier than in the past, with reports stating that 88% of the 2024/25 crop had been sold. In contrast, sales for the 2025/26 harvest have lagged at only 13%, indicating potential supply shortages and producer hesitance to release their stock.
Concerns over future supply persist as reported exports of Brazil’s green coffee fell year-over-year. The government crop forecasting agency, Conab, has predicted a decline in Brazil’s coffee production for the 2025/26 crop year, primarily influenced by prolonged dry conditions attributed to El Niño, which have adversely affected coffee tree flowering stages and overall yield potential.
In Vietnam, the production of robusta coffee has been severely impacted by drought, with a projected 20% reduction to approximately 1.472 million metric tons for the 2023/24 crop year. Despite a slight adjustment in the upcoming year’s estimation, continued declines in Vietnamese exports further reinforce bullish sentiments in the coffee market.
Contrarily, reports of increased global coffee exports exert downward pressure on prices, with Brazil’s 2024 exports hitting record highs. However, a decrease in global coffee exports was noted for December, suggesting a mixed outlook. The USDA’s forecasts indicate an overall production increase for 2024/25 but with low ending stocks, hinting at supply challenges.
Volcafe’s estimates for the 2025/26 marketing year signal concerns for arabica production in Brazil, projecting a significant deficit and highlighting ongoing challenges stemming from unfavorable weather conditions. These factors create apprehension regarding future coffee supply, sustaining higher market prices.
Rich Asplund does not hold any mentioned positions in this article. For comprehensive information regarding risks and disclosures, please refer to the Barchart Disclosure Policy.
The coffee market currently faces upward pressure on prices stemming from below-normal rainfall in Brazil, resulting in reduced crop yields. Declining inventory levels, along with a higher percentage of the current harvest already sold, contribute to this bullish sentiment. However, mixed signals regarding global coffee exports and production projections necessitate careful monitoring of future market dynamics.
Original Source: www.tradingview.com
