Coffee Prices Decline Amid Weak Brazilian Real and Production Forecasts

Coffee prices fell on Thursday as the Brazilian real weakened, erasing prior gains. Projected global coffee production for 2024/25 is expected to increase by 4%. However, Brazil’s coffee output forecast has been reduced due to drought conditions, contributing to a potential market deficit.

On Thursday, coffee prices demonstrated a decline following initial gains, influenced by a weaker Brazilian real. The May arabica coffee (KCK25) closed down by 1.60 cents (0.43%), while May ICE robusta coffee (RMK25) fell by 34 cents (0.63%).

The decline in coffee prices was coupled with projections indicating a 4% year-on-year increase in world coffee production for 2024/25, totaling approximately 174.855 million bags. This includes a 1.5% increase in arabica production, amounting to 97.845 million bags, and a 7.5% rise in robusta production to 77.01 million bags.

In a separate forecast from the USDA’s Foreign Agricultural Service (FAS), it was anticipated that ending stocks for 2024/25 would decline by 6.6% to a 25-year low of 20.867 million bags, down from 22.347 million bags in 2023/24. Notably, Brazil’s coffee production forecast for the same period was lowered to 66.4 million metric tons, down from an earlier prediction of 69.9 million metric tons.

Additionally, the 2025/26 marketing year estimates have seen a reduction in Brazil’s arabica coffee production to 34.4 million bags, approximately 11 million bags less than previously estimated. This adjustment follows reports from a crop tour revealing the severity of drought conditions in Brazil. Volcafe has also projected a global deficit in arabica coffee for 2025/26, estimating a shortfall of 8.5 million bags, marking the fifth year of consecutive deficits.

Rich Asplund, the author of this article, has disclosed that he did not hold any positions in the related securities at the time of publication, and the information herein is provided solely for informational purposes.

For further information, please refer to the Barchart Disclosure Policy.

In summary, coffee prices declined on Thursday due to a weaker Brazilian real and forecasts indicating increased global production. Brazil’s coffee output predictions were revised downward due to adverse weather conditions, contributing to anticipated supply deficits in the coming years. Overall, the market continues to grapple with fluctuating production estimates amid challenging environmental factors.

In conclusion, the recent downturn in coffee prices has been largely attributed to a weaker Brazilian real and adjusted production forecasts. While there is an expected rise in global coffee production for the upcoming years, Brazil’s reduced output estimates reflect ongoing climatic challenges that may lead to a sustained supply deficit. Stakeholders should monitor these developments closely as they could significantly impact the market moving forward.

Original Source: www.tradingview.com