Coffee prices are rising due to drought in Brazil and a strong Brazilian real, with projections showing a slight increase in global production but a significant reduction in Brazilian stocks. Estimates for arabica coffee production in later years have been lowered further, suggesting ongoing deficits in the market.
In recent trading, coffee prices have increased, largely attributed to adverse dry conditions in Brazil and the strengthening of the Brazilian real. Specifically, May arabica coffee has risen by 2.05%, accompanied by a 1.89% increase in May robusta coffee. Notably, Somar Meteorologia reported that the Minas Gerais region, Brazil’s primary arabica coffee area, received only 30.8 mm of rain in the week ending March 15, which is significantly below the historical average, at just 71%.
Additionally, the Brazilian real’s strength is influencing global coffee market forecasts positively. Projections indicate a registered increase of 4.0% in world coffee production for the 2024/25 period, reaching 174.855 million bags, with arabica production anticipated to increase by 1.5%. Meanwhile, robusta production is projected to grow by 7.5%. However, the USDA’s Foreign Agricultural Service (FAS) predicts that ending stocks will decline by 6.6% to a 25-year low, dropping from 22.347 million bags in 2023/24 to 20.867 million bags in 2024/25.
Furthermore, recent data from Volcafe indicates a significantly lowered estimate for Brazil’s arabica coffee production for the 2025/26 marketing year, now projected at 34.4 million bags. This is a substantial decrease of approximately 11 million bags from earlier estimates due to severe drought conditions confirmed during a crop tour. This forecast also implies a worsening global arabica coffee deficit, reaching 8.5 million bags for 2025/26, marking the fifth consecutive year of deficits.
It is important to note that Rich Asplund, on the date of publication, did not have any positions, either directly or indirectly, in the securities discussed. The information presented in this article serves purely for informational purposes, and readers are encouraged to consult the Barchart Disclosure Policy for further details.
Coffee prices have risen due to unfavorable dry conditions in Brazil and a robust Brazilian real, with forecasts indicating reduced production and stock levels. While global coffee output is predicted to increase for 2024/25, the outlook for Brazil’s future coffee production remains grim, with significant deficits anticipated in the subsequent years. Overall, these factors underscore the challenges faced by the coffee market amid climatic concerns.
Original Source: www.tradingview.com
