Arabica Coffee Prices Affected by Brazil’s Dry Weather
Arabica coffee prices rose 2.90% due to dry weather in Brazil, while robusta prices dipped due to expected rainfall in Vietnam. Brazil’s lower coffee yield forecasts and shrinking inventories are impacting prices. A higher percentage of Brazil’s harvest has been sold compared to previous years, suggesting reduced supply. Overall, challenging weather conditions indicate potential deficits in global coffee production.
Arabica coffee prices experienced a notable rise, achieving an increase of 2.90% as of Wednesday, while robusta coffee prices exhibited a slight decline. The surge in arabica prices can be attributed to inadequate rainfall in Brazil, which threatens to diminish coffee crop yields. Meteorological reports indicated a continuation of dry and hot weather, likely affecting coffee crops just prior to the upcoming harvest in May.
Despite the strong performance of arabica coffee, robusta prices dipped due to forecasts predicting increased rainfall in Vietnam, which would enhance soil moisture and bolster robusta crop yields. In fact, forecasts suggest daily rain for the coming week in Vietnam’s Central Highlands, the nation’s primary coffee-producing region.
Significantly, the coffee growing region of Minas Gerais in Brazil received only 24% of average rainfall in the week ending February 22. This deficit emphasizes the challenges faced by Brazil, the largest producer of arabica coffee worldwide. Compounding these issues, reports indicated that both arabica and robusta inventories have reached multi-month lows, thus sustaining upward pressure on coffee prices.
Encouragingly, a greater percentage of Brazil’s coffee harvest has been sold compared to previous years, indicating diminished supply. Reports revealed that 88% of the 2024/25 coffee harvest had already been sold by February 11, surpassing previous sales rates. However, sales for the 2025/26 crop have lagged, suggesting hesitance among producers to continue selling.
Concerns regarding supply disruptions persist, as Brazil’s January coffee exports fell by 1.6% year-on-year, while predictions indicate a decline in the 2025/26 coffee crop. Persistent dry weather has hindered the flowering stage of coffee trees, resulting in reduced prospects for future arabica yields. Brazil is currently experiencing its most severe drought in over four decades.
Robusta prices are also influenced by diminished production in Vietnam due to drought, which has led to a significant drop in coffee yields. Projections show Vietnam’s coffee production for 2024/25 to decrease slightly. However, on a more positive note, Vietnam’s coffee production estimates have been revised upward, reflecting potential recovery in production rates.
In terms of global coffee exports, recent data suggests a mixed outlook with higher Brazilian exports but lower global volume in some sectors. The USDA projected an increase in world coffee production for 2024/25, though it anticipated a significant drop in Brazil’s production numbers. Furthermore, ongoing assessments indicate potential future deficits in global arabica coffee supplies.
In summary, emerging issues concerning weather conditions in Brazil, evolving export rates, and changing inventory levels continue to affect coffee market dynamics. Notably, the projected deficits in coffee production could resonate through the 2025/26 marketing year as the market grapples with the implications of these supply challenges.
In summary, arabica coffee prices are being positively influenced by dry weather conditions in Brazil, potentially leading to lower crop yields as the harvest approaches. Conversely, robusta prices are slightly affected by forecasts indicating improved rainfall in Vietnam. Supply constraints have raised prices amidst reports of declining inventories. Global projections suggest that coffee production may face significant deficits in upcoming harvests, generating ongoing market volatility and requiring close observation from stakeholders.
Original Source: www.tradingview.com
