Coffee Prices Support Grows Amid Drought Conditions in Brazil

Coffee prices are experiencing upward momentum due to decreased rainfall in Brazil, raising concerns about crop yields. Recent reports indicate that below-normal rain could significantly impact production, while inventory levels for both arabica and robusta are declining. Additionally, coffee sales have accelerated, contributing to fears of reduced supply that may support ongoing price increases.

On Tuesday, May arabica coffee (KCK25) rose by +11.75 (+3.04%), while May ICE robusta coffee (RMK25) increased by +159 (+2.90%). Coffee prices experienced gains, reaching a 1-1/2 week high for arabica and a 1-week high for robusta. This rise is attributed to below-normal rainfall in Brazil, which could significantly diminish coffee crop yields. Last Monday, Somar Meteorologia reported that the Minas Gerais region, Brazil’s largest arabica coffee area, accumulated only 11.4 mm of rain, which is merely 24% of the historical average.

In summary, coffee prices are being bolstered by reduced rainfall in Brazil, leading to concerns about future crop yields. Inventory levels for both robusta and arabica coffee are declining, while a faster sales pace among producers points to a dwindling supply. These factors, together with long-term impacts from drought conditions, suggest that coffee prices may remain elevated moving forward. Continued attention to weather patterns and production forecasts will be essential for market participants.

Original Source: www.tradingview.com