Arabica coffee prices have risen due to adverse weather conditions in Brazil, with rainfall significantly below average threatening future yields. Conversely, robusta coffee prices have decreased amid rising inventories. The outlook is complicated by reduced export figures and projections of shrinking coffee crops in both Brazil and Vietnam, leading to ongoing volatility in the coffee market.
The coffee market is experiencing mixed prices, with arabica coffee reaching a two-week high amidst concerns over weather conditions in Brazil. As reported, the Minas Gerais region, Brazil’s primary arabica coffee growing area, received only 30.8 mm of rain, which is substantially below the historical average. High temperatures and insufficient rainfall are expected to decrease coffee yields this year according to Cooxupe, Brazil’s largest arabica cooperative.
On the other hand, robusta coffee prices have declined following a rise in ICE-monitored inventories, reaching 4,336 lots, a 1-1/2 week high. Meanwhile, arabica coffee inventories dropped to a 3-1/2 week low, recorded at 782,648 bags. These supply concerns are contributing to upward price pressures for coffee in the market.
Further complicating the coffee supply outlook, Cecafe indicated that Brazil’s green coffee exports fell by 12% year-over-year in February, totaling 3 million bags. Forecasts from Conab projected a declining coffee crop for Brazil in 2024 and 2025, with estimates cut from earlier projections.
Despite the positive aspects for arabica, Marex Solutions warned that a global surplus of coffee might grow to 1.2 million bags in the 2025/26 season, up from just 200,000 bags in the 2024/25 season. Additionally, robusta prices face bearish pressure due to increased exports from Vietnam, which reported a 6.6% year-on-year rise in February coffee exports.
South and Central America’s coffee crops could suffer long-term damage due to prolonged dry El Nino conditions, affecting Brazil’s prospects for its 2025/26 arabica crop and complicating recovery for Colombia’s coffee industry. Production is expected to decline in Vietnam as well, attributed to drought conditions that have impeded robusta output.
Reports suggest that while some coffee exports may rise, others like Brazil’s 2024 exports are expected to hit record highs at 50.5 million bags. Conversely, the December global export statistics displayed a decrease, showcasing the complexities of the coffee market.
According to the USDA, the overall coffee production forecast for 2024/25 indicates a 4% increase globally, while ending stocks are expected to fall to a 25-year low. Additionally, a significant forecast adjustment for Brazil’s 2025/26 arabica production signals a volatile market moving forward, with potential deficits growing wider.
In conclusion, the coffee market is currently marked by fluctuating prices, particularly for arabica coffee, driven by adverse weather conditions in Brazil and declining yields. Robust concerns about supply and forecasts of reduced production in key coffee-producing regions, such as Brazil and Vietnam, are likely to influence market dynamics. Despite mixed data on exports and production, the prevailing weather woes continue to create uncertainty in coffee prices.
Original Source: www.nasdaq.com
