Arabica Coffee Prices Rise Amid Drought Concerns in Brazil

Arabica coffee prices are rising due to insufficient rainfall affecting Brazil’s coffee crops, reaching a two-week high. Conversely, robusta coffee prices have fallen amid rising inventories. Brazil’s coffee exports declined significantly, and forecasts indicate continued challenges for production, particularly due to drought conditions. The market outlook remains complex with mixed signals affecting price dynamics.

Arabica coffee prices have reached a two-week high, reflecting concerns over inadequate rainfall in Brazil which threatens coffee production. On the other hand, robusta coffee prices have seen a decline due to increased inventories. Recent reports highlighted that Brazil’s largest arabica coffee-growing region received significantly below average rainfall, raising fears about future yields and supporting arabica pricing while adding pressure on robusta coffee.

Data from Cecafe indicated that February coffee exports from Brazil decreased by 12% year-on-year, totaling around 3 million bags. Concurrently, the Brazilian government’s agricultural forecast agency has estimated a 4.4% drop in the 2025/26 coffee crop to 51.81 million bags, as well as a slight decrease in the expected 2024 production to 54.2 million bags.

Market analysts have issued cautionary notes, suggesting that the global coffee surplus could widen to 1.2 million bags in the 2025/26 season. In contrast, robusta coffee is currently being supported by production declines. Vietnam’s robusta coffee yield dropped 20% due to drought conditions, with forecasts indicating further decreases in production for the upcoming marketing year.

Increasing global coffee exports may add downward pressure on coffee prices. Nevertheless, organizations like the USDA have projected a general rise in coffee production for 2024/25, anticipating a 4% increase overall, though Brazil’s production estimates remain lowered. These mixed signals underscore a volatile coffee market influenced by climatic conditions and export dynamics.

In summary, arabica coffee prices have surged due to unfavorable weather conditions in Brazil, raising concerns over production yields. Conversely, robusta prices are under pressure due to rising inventories and production declines in Vietnam. The outlook for coffee remains complex, with forecasts indicating potential surpluses and production increases, yet tempering this optimism are severe drought conditions affecting key producing regions. As these dynamics evolve, they will continue to shape the coffee market landscape.

Original Source: www.nasdaq.com