Coffee prices have risen due to dry conditions in Brazil and a weaker dollar. Despite a global coffee surplus prediction, increasing inventories and adverse climate conditions raise concerns about future production. Vietnam’s robusta exports surged despite a reduction in coffee output, with projections for a worsening arabica deficit noted for 2025/26.
Coffee prices have experienced an upward trend, with May arabica coffee increasing by 1.59% and May robusta coffee rising by 3.18%. The increase is attributed to insufficient rainfall in Brazil, particularly in Minas Gerais, which reported only 2% of the historical average precipitation. Additionally, the weakening of the dollar is providing further support to coffee prices as indicated by the drop in the dollar index to a four-and-a-half-month low.
A rise in coffee inventories poses a concern for price stability. Recently, ICE-monitored arabica coffee inventories increased to 799,406 bags, marking a one-week high, while robusta inventories reached a one-month high of 4,356 lots. Furthermore, a report from Marex Solutions anticipates a significant expansion of the global coffee surplus, forecasting a rise to 1.2 million bags in the 2025/26 season from the previous surplus of 200,000 bags for 2024/25.
Robusta coffee prices are affected by positive export performance from Vietnam. The country reported a year-over-year increase of 6.6% in coffee exports for February, reaching 169,000 metric tons. However, concerns persist regarding the overall reduction in coffee production in Vietnam, with a noted 20% decline attributed to drought, resulting in the smallest crop in four years.
Supply uncertainties continue to underpin coffee prices. Brazil’s green coffee exports dropped by 1.6% year-on-year in January, coupled with a recent forecast by Conab estimating a 4.4% decrease in Brazil’s 2025/26 coffee crop. The long-term ramifications of last year’s El Nino, which has produced record low rainfall, threaten ongoing production capabilities in both Brazil and Colombia, thereby impacting global coffee supply.
Vietnam’s coffee production estimates for the 2024/25 marketing year indicate a slight decrease to 27.9 million bags, although some forecasts suggest an increase to 28 million bags. While reports indicate larger global coffee export volumes from Brazil, the International Coffee Organization noted a decline in global exports for December.
The USDA’s recent biannual report reflected contrasting predictions for coffee prices, indicating a potential increase in global coffee production for 2024/25 alongside a decline in ending stocks to a 25-year low. As for Brazil’s production estimates, revisions have led to a projected drop in coffee inventories for the closing of the 2024/25 season.
For the 2025/26 season, projections describe a worsening arabica coffee deficit, suggesting a significant impact of Brazil’s ongoing drought crisis on future supply. Notably, Volcafe adjusted its estimates for Brazil’s arabica production downwards, forecasting a deficit of 8.5 million bags globally for 2025/26.
In conclusion, the coffee market is currently influenced by a combination of adverse weather conditions in Brazil, fluctuating dollar values, and varying inventory levels, resulting in escalating prices. Brazilian coffee production and export forecasts indicate significant challenges ahead, compounded by the impacts of climate change and reduced production in Vietnam. Industry stakeholders should monitor these evolving factors carefully to navigate potential market volatility in the coming years.
Original Source: www.tradingview.com
