May Coffee Prices Show Mixed Trends Amid Supply Concerns

Coffee prices exhibited a mixed performance recently, with arabica rising and robusta declining. Supply fears prompted by adverse weather conditions in Brazil impact the market. Investors should closely monitor these developments.

Date: 23-04-2025

AI Rating: 6

The latest report highlights key factors affecting coffee prices, particularly arabica and robusta. Recent movements show arabica coffee prices have rallied due to a stronger Brazilian real which has discouraged export activities from producers. This pushing upwards could indicate a tightening supply, particularly as Rabobank forecasts a significant decline in Brazil's 2025/26 arabica coffee crop likely due to adverse weather, specifically dry conditions affecting flowering.

Supply Concerns Impact Prices
Support for arabica coffee is evident, fueled by predictions of a 13.6% year-on-year drop in Brazilian output. Likewise, declining exports from Cecafe–reporting a 26% lesser amount year-on-year is alarming and can support prices in the short term. Contrarily, the robusta market struggles with increased supply forecasts, which could suppress prices going forward. The insinuation of larger inventories for robusta is especially concerning, reflecting potential oversupply.

Impact of Global Trade Dynamics
The ongoing global trade tensions are also a significant factor in the broader commodity prices, notably coffee. Rising tariffs are feared to negatively impact demand from consumers, meaning pricing power may be reduced amidst higher costs. Investors might need to factor in these economic dynamics which can directly affect future profitability for coffee-related stocks.

Concerns raised by Marex Solutions and the USDA regarding the global coffee surplus are crucial, particularly with predictions of an increase in production across major regions like Vietnam. As coffee market dynamics continue shifting toward surplus, robusta coffee may see significant price pressure. Factors such as El Nino’s aftermath still weighing heavily on Brazil's output are likely to keep arabica prices buoyant, fostering a duality in coffee prices where arabica maintains strength while robusta remains vulnerable.

Stocks: KO SBUX