Coffee prices have increased due to insufficient rainfall in Brazil, significantly impacting production forecasts. Projections indicate a global coffee production rise in the upcoming year, although Brazil’s coffee output is expected to decline due to drought. This suggests ongoing challenges and potential deficits in coffee supply.
Coffee prices have shown a positive trend, with May arabica coffee increasing by 1.89% and May ICE robusta coffee up by 1.06%. This rise is attributed to insufficient rainfall impacting coffee production in Brazil, alongside the strength of the Brazilian real. According to Somar Meteorologia, the Minas Gerais region, which is crucial for arabica coffee, received only 30.8 mm of rain, which is 71% of the average for the week ending March 15.
Forecasts from the Brazilian government predict a 4% year-on-year increase in global coffee production for 2024/25, totaling 174.855 million bags. This includes a 1.5% rise in arabica production, reaching 97.845 million bags, and a 7.5% increase in robusta production to 77.01 million bags. The USDA also projects that the ending stocks for 2024/25 will fall to a 25-year low of 20.867 million bags, a decline of 6.6% from the previous year.
Additionally, the USDA’s FAS revised Brazil’s coffee production for 2024/25 down to 66.4 million metric tons, lower than earlier estimates due to ongoing drought conditions. Volcafe has also cut its 2025/26 Brazil arabica coffee production estimates to 34.4 million bags, down by approximately 11 million bags from their earlier September forecast. This ongoing situation points toward a broader global arabica coffee deficit, projected to reach 8.5 million bags for 2025/26, marking the fifth consecutive year of such deficits.
In summary, insufficient rainfall in Brazil has led to increased coffee prices and forecasts of reduced coffee production. The combination of dry weather and strong currency conditions indicates potential challenges for future harvests, particularly for arabica coffee. Analysts predict significant production declines, pointing to a continued global deficit in coffee supply.
Original Source: www.tradingview.com
