Arabica Coffee Prices Surge Amid Brazilian Weather Challenges

Arabica coffee prices have increased due to insufficient rainfall in Brazil, affecting crop yields, while robusta coffee prices have declined due to rising inventories. Brazil’s government forecasts a decrease in coffee production, raising supply concerns. In contrast, Vietnam’s robusta production is also facing challenges due to drought. Overall, the global coffee market remains volatile with mixed forecasts and supply chain issues influencing prices.

Coffee prices are experiencing fluctuations, with arabica coffee reaching a two-week high while robusta coffee faces declines. The rise in arabica prices can be attributed to insufficient rainfall in Brazil, which threatens coffee yield. According to Somar Meteorologia, Minas Gerais, Brazil’s predominant arabica-producing region, received only 30.8 mm of rain in the week ending March 15, marking 71% of its historical average. Additionally, Cooxupe, Brazil’s largest arabica cooperative, noted high temperatures and below-average rainfall from last month would impact yields this year.

Robusta coffee, on the other hand, has seen a decrease as ICE-monitored inventories rose to a one-and-a-half-week high of 4,336 lots, reversing earlier gains. In contrast, arabica coffee inventories fell to a three-and-a-half-week low of 782,648 bags. Concerns over coffee supply continues to bolster prices, highlighted by Cecafe reporting a 12% year-over-year drop in Brazil’s green coffee exports for February.

Forecasts from Brazil’s government crop agency, Conab, projected a 4.4% year-on-year reduction in coffee crop for 2025/26, predicting a low of 51.81 million bags. Furthermore, it reduced its 2024 crop estimate slightly by 1.1% to 54.2 million bags. However, Marex Solutions warned of an anticipated increase in global coffee surplus during the 2025/26 season, widening to 1.2 million bags.

The report from Vietnam’s General Statistics Office indicated a rise in February coffee exports; Vietnamese robusta coffee production is expected to decline due to drought conditions affecting yields. Specifically, the Vietnamese coffee output for the 2023/24 crop year has decreased by 20%, representing the smallest production volume in four years.

Furthermore, news regarding increased global coffee exports has contributed to bearish price sentiment. While Brazil has reported a significant rise in coffee exports, the International Coffee Organization has indicated a decline in global coffee exports. The USDA’s recent report offered a mixed perspective, citing a projected increase in worldwide coffee production alongside declining ending stocks.

The drought conditions exhibited in Brazil remain a pressing concern for arabica coffee yields, which are projected to experience significant deficits in future assessments. This enduring drought, the worst since 1981, hampers flowering stages crucial for production, indicating a troubling trend for the future of arabica coffee.

Overall, the dynamics of coffee prices reflect a complex interplay of weather conditions and market projections. With arabica prices on the rise due to problematic weather in Brazil and reduced inventories, and robusta suffering from increased inventories, the market remains highly responsive to ongoing supply concerns. Forecasts suggest substantial deficits and potential impacts on yield in the future, especially for Brazilian arabica coffee. It is vital for stakeholders to monitor these developments closely.

Original Source: www.nasdaq.com