Recent declines in coffee prices are attributed to a weak Brazilian real and projections of increased coffee production for 2024/25. The USDA forecasts a drop in coffee ending stocks to a 25-year low. Additionally, estimates for Brazil’s arabica production have been reduced due to drought conditions, resulting in an anticipated global coffee deficit for the upcoming marketing year.
Coffee prices have recently experienced a decline, with May arabica coffee trading down by 0.19% and May ICE robusta by 0.43%. This downturn follows the Brazilian real’s depreciation and predictions of a 4.0% global increase in coffee production for 2024/25. Arabica production is expected to rise modestly to 97.845 million bags, while robusta is projected to increase significantly to 77.01 million bags.
In terms of inventory, the USDA’s Foreign Agricultural Service forecasts a 6.6% reduction in ending stocks, which would reach a 25-year low of 20.867 million bags, down from 22.347 million bags in the preceding year. Additionally, Brazil’s estimated coffee production for 2024/25 is projected at 66.4 million metric tons, which represents a decrease from the prior estimate of 69.9 million metric tons. The USDA anticipates Brazil’s coffee inventories will fall by 26% year-on-year, totaling 1.2 million bags by the conclusion of the 2024/25 season in June.
Looking ahead to the 2025/26 marketing year, Volcafe has revised its estimate for Brazil’s arabica coffee production to 34.4 million bags—a significant reduction of approximately 11 million bags since September. This adjustment stems from observations of severe drought conditions impacting Brazil’s coffee crops. Volcafe further predicts a global arabica coffee deficit of 8.5 million bags for 2025/26, surpassing the 5.5 million bag deficit expected in 2024/25 and marking the fifth consecutive year of shortfalls.
In summary, the ongoing weakness in the Brazilian real has negatively influenced coffee prices amidst projections of increased coffee production. The USDA anticipates a significant reduction in coffee stocks to historical lows. Furthermore, projections for Brazil’s arabica production have been downgraded due to adverse weather conditions, indicating a continuing trend of growing deficits in the coffee market.
Original Source: www.tradingview.com
