Coffee Prices Surge Amid Brazilian Drought Concerns

Coffee prices have risen due to dry weather in Brazil, with arabica up 3.71% and robusta 0.66%. Concerns about reduced crop yields and shrinking inventories support this trend. Brazil’s coffee sales are strong, but long-term supply fears prevail amid changing weather patterns. The USDA forecasts increases in production, albeit with declining inventory levels.

Coffee prices have recently increased, with May arabica coffee rising by 3.71% and robusta coffee by 0.66%. This surge is attributed to concerns over Brazil’s dry weather, which threatens coffee crop yields as harvest approaches in May. Meteorological reports indicate continued hot and dry conditions in Brazil, raising the risks to crops that are pivotal during their final growth stages.

Brazil is known as the world’s largest arabica coffee producer, and reports indicate that its main growing region received only 24% of its historical average rainfall last week. Such drought conditions, particularly in Minas Gerais, are causing alarm among producers as they prepare for the coffee harvest. These environmental challenges are expected to impact crop yields significantly.

Additionally, declining coffee inventories have contributed to rising prices, with ICE-monitored robusta inventory reaching a two-month low and arabica inventories also experiencing a decline. Increased sales of Brazil’s coffee harvest have further constrained supply, with 88% of the 2024/25 harvest sold compared to previous years. Conversely, sales for the 2025/26 crop remain slow, indicating limited fresh supply.

Supply concerns are also reflected in recent export figures, with green coffee exports from Brazil experiencing a year-over-year decline. Brazil’s government has revised its coffee crop forecasts downward, predicting significant reductions for upcoming harvests. The long-term effects of last year’s El Nino weather patterns may continue to affect coffee plantations throughout South and Central America.

Robusta prices are bolstered by a decrease in production, particularly due to drought conditions affecting Vietnam, which is also experiencing a reduction in export figures. Nevertheless, recent reports indicate a rise in global coffee exports from Brazil, although overall trends in production seem bearish due to declining export figures in various global markets.

The USDA’s biannual report presents a mixed outlook for coffee prices, forecasting an increase in world coffee production. However, it also anticipates a reduction in coffee inventories to a 25-year low. The projections highlight ongoing uncertainties in Brazil’s coffee market, particularly as severe droughts continue into the 2025/26 marketing year. Reports illustrate that this could lead to substantial deficits in the coffee supply going forward.

In summary, the recent rise in coffee prices is primarily influenced by adverse weather conditions in Brazil, which threaten crop yields and have led to reduced inventories. As producers sell a higher percentage of their anticipated harvests early, concerns about future supply persist. Global coffee production forecasts present mixed signals with potential deficits looming for the upcoming years. The coffee market remains sensitive to environmental factors and changing export dynamics.

Original Source: www.tradingview.com