Coffee prices rose on Monday, influenced by dry conditions in Brazil and a strong Brazilian real. Future coffee production forecasts indicate growth, but also significant declines in Brazil’s inventory and production linked to drought, raising concerns over a potential deficit.
On Monday, coffee prices experienced a modest increase, with the May arabica coffee (KCK25) rising by 1.64% or +5.20 cents, and the May ICE robusta coffee (RMK25) up by 1.43% or +77 cents. This uptick was influenced by dry conditions in Brazil and a bolstered Brazilian real. According to Somar Meteorologia, Minas Gerais—the primary region for arabica coffee production—received only 30.8 mm of rainfall in the week ending March 15, which is merely 71% of the historical average.
Furthermore, projections by the Brazilian real indicated a 4.0% year-on-year increase in global coffee production for the 2024/25 season, amounting to approximately 174.855 million bags. Specifically, arabica production is expected to increase by 1.5% to 97.845 million bags, while robusta production is forecasted to grow by 7.5% to 77.01 million bags. The USDA’s Foreign Agricultural Service (FAS) predicts a decline in ending stocks for the 2024/25 season to 20.867 million bags, marking a 25-year low, down from 22.347 million bags in 2023/24.
Notably, the USDA’s November 22 forecast revised Brazil’s 2024/25 coffee production estimate down to 66.4 million metric tons, following prior estimates of 69.9 million metric tons. Brazil’s coffee inventories are expected to decrease by 26% year-on-year, totaling approximately 1.2 million bags by the end of the 2024/25 season in June. Additionally, Volcafe adjusted its 2025/26 Brazil arabica coffee production estimate to 34.4 million bags, a reduction of about 11 million bags compared to September’s projections due to an ongoing drought.
For the marketing year of 2025/26, Volcafe also forecasts a global arabica coffee deficit of 8.5 million bags, which is an increase from a previously anticipated deficit of 5.5 million bags for 2024/25. This marks the fifth consecutive year of deficits noted in the global coffee sector.
In summary, coffee prices have settled higher due to unfavorable dry conditions in Brazil and the robust performance of the Brazilian real. Projected increases in global coffee production may not offset the expected low inventory levels and production declines, particularly for Brazil, highlighting the vulnerability of the market amid ongoing drought conditions.
Original Source: www.tradingview.com
