Coffee prices fell moderately due to forecasts of rain in Brazil, which may alleviate drought conditions. Inventory levels and production reports from Vietnam also affected pricing. Continued supply concerns suggest a complex coffee market with potential for future price fluctuations.
On Friday, coffee prices experienced moderate losses, with May arabica coffee closing down 2.75 cents, a decrease of 0.71%, and May ICE robusta coffee declining by 74 cents, down 1.36%. This decline followed reports of imminent rain in Brazil, which analysts believe will alleviate ongoing dry conditions. According to Somar Meteorologia, hot weather will give way to showers in the upcoming week, contributing to the price fluctuations.
Robusta coffee prices were also negatively impacted by a report from Vietnam’s General Statistics Office, which indicated a 6.6% year-over-year increase in coffee exports for February, totaling 169,000 metric tons. The expected rain in Vietnam’s Central Highlands, the largest coffee-producing area in the nation, has created further downward pressure on robusta coffee prices. Vietnam remains the leading producer of robusta coffee beans globally.
Additionally, an increase in coffee inventories has further contributed to the bearish sentiment in the market. As reported, ICE-monitored inventories of robusta coffee reached a one-month high at 4,356 lots. Conversely, arabica coffee inventories declined to a 9-1/4 month low last February but have recently risen to a two-week high of 809,128 bags.
Weather conditions in Brazil’s Minas Gerais region showed that it received 11.4 mm of rain by February 22, only 24% of the historical average, indicating that more rain was needed to support the coffee crop. Brazil holds the leading position in arabica coffee production globally, and the implications of such weather patterns are significant.
In a potentially positive development for prices, a reported 88% of Brazil’s 2024/25 coffee harvest had been sold by February 11, surpassing the previous year’s figures and the five-year average. However, sluggish sales of the 2025/26 crop suggest a reluctance on the part of producers to release more supply into the market.
Ongoing concerns about supply have persisted, particularly as Brazil reported a 1.6% year-over-year decline in green coffee exports in January. Projections from Conab indicate that Brazil’s coffee crop for 2025/26 could decline by 4.4% year-on-year, contributing to further uncertainty. These factors underscore the potential ramifications of the ongoing El Niño weather phenomenon, which has adversely affected coffee production in both Brazil and Colombia.
Market dynamics for robusta coffee prices are being influenced by a decrease in Vietnam’s coffee production, which fell by 20% in the 2023/24 crop year due to drought conditions. Projections also indicate that exports from Vietnam may continue to decline, affecting global supply.
Conversely, news of increasing global coffee exports may exert downward pressure on prices, with recent data indicating a 28.8% year-over-year rise in Brazil’s 2024 coffee exports to a record of 50.5 million bags. However, the ICO reported declines in global coffee exports during the end of the year in comparison to previous years, suggesting mixed market signals.
USDA projections for world coffee production signify modest growth in the 2024/25 marketing year, particularly for robusta coffee. Despite this, inventory figures are expected to drop to a 25-year low, further complicating the supply landscape. The USDA predicts a continuing trend of deficits in global arabica coffee production through 2025/26, raising concerns regarding long-term supply and pricing stability.
In conclusion, coffee prices have faced recent losses influenced by anticipated rainfall in Brazil and increased inventories. Although robusta coffee production in Vietnam has declined, the global coffee export landscape remains mixed. The continued impact of adverse weather patterns and supply shortages indicates a complex pricing environment for the coffee market moving forward. The market remains cautious amid these supply uncertainties, with broader implications for producers and consumers alike.
Original Source: www.tradingview.com
