Coffee Prices React to Weather and Supply Concerns

Coffee prices are mixed as arabica climbs due to supply concerns. Insufficient rain in Brazil is expected to negatively impact coffee yields, which could bolster prices in the coming weeks.

Date: 21-03-2025

AI Rating: 6

Supply Concerns and Price Movements

The report indicates a rise in arabica coffee prices attributed to insufficient rain in Brazil, threatening coffee crops and driving prices higher. Specifically, the arabica variety reached a 2-week high as Cooxupe noted that high temperatures and below-normal rainfall may affect yields.

Crops Decline Expected

Brazil's coffee exports have significantly fallen, with February's green coffee exports down by -12% year-on-year. Additionally, crop forecasts for 2025/26 suggest a notable decrease in production, projected to be 51.81 million bags, representing a -4.4% year-over-year decline. This decrease in yield expectations could lead to increased coffee prices as supplies tighten.

Global Production Insights

The USDA's report presents a mixed outlook, projecting a global coffee production increase of +4.0% in 2024/25, with a slight uptick in arabica production. However, the ending stocks are expected to decline to a 25-year low of 20.867 million bags, which adds pressure to pricing.Dry weather conditions have been persistent, potentially leading to long-term damage in South and Central America, which could further exacerbate these challenges.

Yet, the production of robusta coffee remains robust, despite a slight projected decrease from Vietnam. This may balance out some of the bullish pressures on arabica coffee. Nevertheless, concerns about long-term drought effects and inadequate rainfall continue to play a pivotal role in market expectations.

Market Rating

Overall, the sentiment is mixed regarding coffee prices. While the arabica outlook is bullish due to weather and quantity concerns, the robusta side shows some bearishness amid increased supply. Given the decline in export numbers and the forecasted low production estimates, the overall coffee market outlook remains cautious.

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