On Monday, coffee prices rose due to drought conditions in Brazil and a stronger Brazilian real, with significant projections for coffee production and inventory levels. The USDA forecasts suggest a decline in ending stocks to a 25-year low, while future production estimates for Brazil have been reduced, indicating a potential global supply deficit.
On Monday, coffee prices increased moderately, with May arabica coffee (KCK25) rising by 1.64% to close at +5.20 and May ICE robusta coffee (RMK25) increasing by 1.43% to close at +77. This uptick was attributed to the dry conditions in Brazil as well as the strengthening of the Brazilian real.
Somar Meteorologia reported that Brazil’s primary arabica coffee region, Minas Gerais, received only 30.8 mm of rainfall, which is 71% of the historical average for the week ending March 15. Despite this, projections indicate a 4.0% increase in world coffee production for 2024/25, totaling 174.855 million bags, largely driven by robust increases in both arabica and robusta varieties.
The USDA’s Foreign Agricultural Service (FAS) forecasts a 6.6% drop in ending stocks for 2024/25, reaching a 25-year low of 20.867 million bags. Furthermore, the FAS has revised Brazil’s 2024/25 coffee production estimate to 66.4 million metric tons, a reduction from the previously estimated 69.9 million metric tons, forecasting a decline in inventories to 1.2 million bags by the end of June 2025.
Looking ahead to the 2025/26 marketing year, Volcafe has adjusted its estimates for Brazil’s arabica coffee production down to 34.4 million bags, an 11 million bag decrease from prior projections. This adjustment emerges following the assessment of significant drought conditions affecting Brazil. Volcafe also anticipates a global arabica coffee supply deficit of 8.5 million bags, marking the fifth consecutive year of shortfalls.
In conclusion, the coffee market experienced a slight increase in pricing, primarily due to adverse weather conditions in Brazil and the Brazilian real’s strength. Future projections indicate a looming global supply deficit, particularly in arabica coffee, with production estimates being revised downwards amidst ongoing drought conditions. These developments signify critical implications for both the coffee industry and market dynamics moving forward.
Original Source: www.tradingview.com
