Coffee Prices Decline as Brazilian Real Weakens

Coffee prices fell as the Brazilian real weakened, with May arabica down -0.55 and robusta down -46. The USDA forecasts a 4% increase in global coffee production for the 2024/25 season, while Brazil’s specific projections indicate lower output due to drought conditions, resulting in significant inventory reductions.

Coffee prices experienced a decline on Friday as the Brazilian real weakened. May arabica coffee closed down by -0.55 (-0.15%), while May ICE robusta coffee decreased by -46 (-0.86%). This reversal came after initial gains, attributed to predictions of a 4% increase in global coffee production for the 2024/25 season, alongside estimates of effective inventory reductions in key regions.

According to the USDA’s Foreign Agricultural Service (FAS), global coffee production is forecasted to reach 174.855 million bags. This includes a 1.5% rise in arabica production to 97.845 million bags, and a more pronounced 7.5% increase in robusta production to 77.01 million bags. Additionally, ending stocks for the 2024/25 year are projected to drop by 6.6% to a notable low of 20.867 million bags.

As for Brazil’s specific contributions, on November 22, the USDA’s FAS revised its forecast for Brazilian coffee production in 2024/25 down to 66.4 million metric tons (MMT), lower than the previously stated 69.9 MMT. Moreover, Brazil’s coffee inventories are expected to contract to 1.2 million bags by the conclusion of the 2024/25 season, indicating a significant year-on-year decline of 26%.

Looking ahead to the 2025/26 marketing year, Volcafe has adjusted its estimate for Brazil’s arabica coffee production to 34.4 million bags. This marks a reduction of approximately 11 million bags from earlier estimates due to the impact of severe drought conditions experienced during crop assessments. This is expected to result in a global arabica coffee deficit of 8.5 million bags, deepening concerns following a consecutive five-year trend of insufficient supply.

In summary, coffee prices fell recently due to the Brazilian real depreciation and revised forecasts indicating increased coffee production but lower ending stocks globally. Particularly concerning is the production decline in Brazil for the 2025/26 marketing year due to drought conditions, potentially continuing a trend of supply deficits. Analysts remain attentive to these developments given their implications for future coffee market dynamics.

Original Source: www.tradingview.com