Coffee Prices Rise Amid Drought Conditions and Strong Brazilian Real

Coffee prices saw a moderate increase on Monday, with May arabica rising 1.64% and robusta increasing 1.43%. The rise is attributed to dry weather in Brazil and a strong Brazilian real. Future projections indicate an increase in global coffee production, yet significant declines in Brazil’s coffee stocks and production estimates are expected due to prolonged drought conditions.

On Monday, coffee prices experienced a moderate increase, driven by dry conditions in Brazil and the strengthening of the Brazilian real. May arabica coffee (KCK25) rose by 1.64%, closing at +5.20, while May ICE robusta coffee (RMK25) increased by 1.43%, closing at +77. Reports indicate that Minas Gerais, Brazil’s primary arabica coffee region, received only 30.8 mm of rain during the week ending March 15, which is 71% of the historical average.

The Brazilian agricultural agency, Conab, has projected a 4.0% year-over-year increase in world coffee production for 2024/25, reaching 174.855 million bags. This projection includes a 1.5% rise in arabica production to 97.845 million bags and a 7.5% increase in robusta production to 77.01 million bags. Additionally, the USDA’s Foreign Agricultural Service (FAS) forecasts a significant decline in coffee stocks, estimating a drop of 6.6% to 20.867 million bags, marking a 25-year low compared to the previous year.

On November 22, the USDA’s FAS reported a downward revision of Brazil’s anticipated coffee production for 2024/25 to 66.4 million metric tons (MMT), a decrease from an earlier estimate of 69.9 MMT. Furthermore, predictions for Brazil’s coffee inventories at the end of the 2024/25 season indicate a reduction of 26% year-over-year, totaling approximately 1.2 million bags.

For the 2025/26 marketing year, Volcafe has revised its estimate for Brazil’s arabica coffee production to 34.4 million bags, reducing the figure by about 11 million bags from an earlier estimate after evidence of a severe drought emerged from crop inspections. Volcafe anticipates a global arabica coffee deficit of 8.5 million bags for 2025/26, surpassing the previously expected deficit of 5.5 million bags for 2024/25, continuing a trend of annual deficits.

In summary, coffee prices have risen due to ongoing dry conditions in Brazil and a robust Brazilian real. Forecasts show an anticipated increase in coffee production for the coming years, albeit with significant declines in Brazil’s coffee stocks and production estimates. These factors highlight the complexities and challenges facing the coffee market in the upcoming years, particularly amid drought conditions.

Original Source: www.tradingview.com