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Coffee Prices Fluctuate Amid Supply Concerns and Weather Impact

Coffee prices show mixed signals with arabica down and robusta up, signaling volatile market conditions. Supply fears are influencing pricing as adverse weather affects production, particularly in Brazil and Vietnam.

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AI Rating:   6

Current Coffee Market Conditions

The report outlines the mixed performance of coffee prices, impacted by weather conditions and supply dynamics. Arabica coffee prices closed lower, while robusta coffee saw a slight uptick. The fluctuations in prices indicate investor interest, but also highlight volatility in the coffee market.

Supply Concerns

Continued fears regarding the supply of both arabica and robusta coffee are notable. The report states that Brazil's coffee exports fell by 12% year-on-year, correlated with the projected decline in Brazil's coffee production, which the USDA estimates at a three-year low. Similarly, Vietnam's coffee production dropped by 20% due to drought, with expectations of further reductions in future production.

Weather Impact

Adverse weather patterns, particularly insufficient rainfall in key growing regions, pose a long-term risk to yields. It has been noted that Brazil has faced the driest weather since 1981, which critically affects the Arabica coffee crop's flowering stage. Such climatic impacts are likely to restrict future supply and keep prices elevated.

Market Dynamics

The report indicates a mixed outlook overall, with increasing inventories of robusta coffee while arabica stocks have declined. However, global surplus expectations for coffee also present a bearish sentiment for prices. The USDA's recent analysis projects an increase in world coffee production in the 2024/25 crop year overall, which may oppose the supply concerns driven by adverse weather, leading to a complex interaction in price expectations.

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