Coffee prices have risen due to dry conditions in Brazil and a stronger Brazilian real. Projections indicate an increase in global coffee production for 2024/25, but Brazil’s output is expected to decline significantly due to drought. The USDA forecasts a notable decrease in coffee inventories.
In the current market, coffee prices are experiencing a moderate increase, with May arabica coffee up 0.76% and May ICE robusta coffee rising by 0.35%. This boost is attributed to dry weather conditions in Brazil and a stronger Brazilian real. Reports indicate that Brazil’s leading arabica coffee region, Minas Gerais, received only 30.8 mm of rain last week, which amounts to 71% of the average rainfall for this period.
According to projections by the Brazilian real C, global coffee production for 2024/25 is expected to increase by 4.0% year-on-year to 174.855 million bags. This includes a 1.5% rise in arabica coffee production to 97.845 million bags and a notable 7.5% increment in robusta coffee production to 77.01 million bags. The USDA’s Foreign Agricultural Service (FAS) anticipates that the ending stocks for 2024/25 will decline by 6.6%, reaching a 25-year low of 20.867 million bags, down from 22.347 million bags in the previous year.
In a separate forecast issued by the USDA on November 22, Brazil’s coffee output for 2024/25 was revised downward to 66.4 million metric tons (MMT), a significant decrease from the earlier estimate of 69.9 MMT. The USDA projects that Brazil’s coffee inventories will drop to 1.2 million bags by the end of the 2024/25 season in June, representing a year-on-year decrease of 26%.
Furthermore, Volcafe has adjusted its 2025/26 production estimates for Brazil arabica coffee down to 34.4 million bags, reflecting a decrease of approximately 11 million bags based on a recent crop tour that highlighted the impact of prolonged drought conditions in Brazil. Additionally, Volcafe predicts that the global arabica coffee deficit for 2025/26 will amount to 8.5 million bags, deepening from the 5.5 million bags deficit projected for 2024/25.
Rich Asplund, the author of this article, disclosed no direct or indirect positions in any of the securities discussed herein, emphasizing that all information presented is for informational purposes only. Readers are encouraged to review the Barchart Disclosure Policy for further details.
In summary, coffee prices have risen due to adverse weather conditions in Brazil and a strengthening currency. Forecasts indicate a modest increase in global coffee production, yet Brazil’s output is expected to decline significantly. The downward adjustments in production estimates highlight the ongoing drought’s impact and suggest potential future deficits in coffee supply.
Original Source: www.tradingview.com
