Impact of Dry Weather on Arabica Coffee Prices and Market Dynamics
Arabica coffee prices are rising due to dry weather in Brazil threatening yields, while robusta prices are falling on expected rains in Vietnam. Brazil’s coffee inventories are declining, and producers are selling their harvests at accelerated rates. Global coffee production projections are mixed, indicating both increases and significant forecast reductions, particularly for Brazil’s arabica crops.
Arabica coffee prices have seen an uptick recently, with May arabica coffee (KCK25) closing at +11.55 (+2.90%), marking a two-week high. This increase is attributed to below-normal rainfall in Brazil, which threatens coffee yields as reported by Somar Meteorologia. The ongoing dry and hot weather may adversely affect crops during crucial development phases leading up to the May harvest.
In contrast, robusta coffee prices have dropped slightly, closing at -2 (-0.04%). This decline follows forecasts of increased rainfall in Vietnam, which is expected to enhance soil moisture and boost robusta yields. Rain is predicted for the next week in Vietnam’s Central Highlands, crucial for robusta coffee production.
Data from Somar Meteorologia indicated that Brazil’s main arabica-producing area, Minas Gerais, received only 11.4 mm of rain for the week ending February 22, representing a mere 24% of its historical average. Brazil remains the largest producer of arabica coffee globally, and insufficient rainfall has raised concerns for upcoming crops.
Additionally, decreasing coffee inventories contribute to rising prices, with ICE-monitored robusta stocks recently hitting a two-month low of 4,247 lots. Arabica inventories similarly declined, yet showed improvement from their lowest point to 809,128 bags last Thursday, indicating volatile market conditions.
Producers have also accelerated sales of Brazil’s coffee harvest, with 88% of the 2024/25 crop already sold, higher than 79% at the same time last year and above the five-year average of 82%. However, movement for the 2025/26 crop is sluggish, indicating possible supply shortages.
Supply concerns remain prevalent with reports of decreased green coffee exports from Brazil, down by 1.6% year-on-year in January. Brazil’s forecast for the 2025/26 crop indicates a drop to a three-year low of 51.81 million bags, reflecting ongoing adverse weather conditions from El Niño.
Long-term drought conditions, the worst in over four decades, have caused damage to coffee crops in Brazil and impacted Colombia as well. These environmental issues are expected to have lasting effects on coffee production in South and Central America.
Robusta coffee prices are also influenced by diminished production levels in Vietnam due to drought, which has led to a 20% decline in output for the 2023/24 crop year. Projections for future production suggest minimal recovery in the coming seasons, with ongoing challenges in exports.
On a contrasting note, reports indicate robust global coffee exports, with Brazil’s 2024 shipments climbing to record levels. However, global figures show a drop in exports, suggesting variability in market trends affecting pricing dynamics.
The USDA’s mixed report depicts an expected rise in global coffee production for 2024/25, with increases projected for both arabica and robusta types. However, significant cuts to Brazil’s expected production highlight persistent agricultural challenges impacting coffee supply.
Looking ahead, estimates for Brazil’s arabica production in 2025/26 have dropped significantly, reinforcing the expectation of annual deficits as the market adjusts to the climatic impact on production.
Arabica coffee prices are currently rising due to adverse weather conditions in Brazil, which threaten crop yields. Meanwhile, robusta prices are falling as Vietnam anticipates beneficial rains. Continuous supply concerns, reduced inventories, and accelerated sales are impacting market dynamics. The mixture of potential increases in global coffee exports alongside decreasing production forecasts raises questions about future pricing stability. Overall, climatic factors are causing significant fluctuations in both arabica and robusta coffee markets.
Original Source: www.tradingview.com
