Mixed Outlook for Coffee Prices amidst Production Concerns

Coffee prices have shown mixed movements as arabica rallies on supply fears, while robusta faces downward pressure. Weather patterns and changing production estimates could impact stock prices of key players in the coffee sector.

Date: 29-03-2025

AI Rating: 6

Market Movements: The recent trading session saw arabica coffee prices close up by 0.30% while robusta coffee prices dipped by 0.26%. The fluctuations in coffee prices can be largely attributed to varying production forecasts and currency fluctuations, notably a weaker dollar strengthening demand for arabica.

Earnings Expectations: The report indicates that supply concerns are likely affecting performance. For arabica, weather-related issues in Brazil may lead to lower yields, impacting net income for companies reliant on coffee sales. Specifically, reports indicate that Brazil's coffee crop could experience a decline, which can place upward pressure on prices and potentially affect the revenues of companies in the market.

Global Supply Dynamics: The predictions of increased robusta production in Vietnam and Brazil suggest an overall increase in supply that could lessen prices over the medium term. The forecast from Marex Solutions stating that global coffee surplus is set to widen could create a bearish outlook for pricing in the future. The alterations in production estimates and increased global coffee exports noted may also lead to increased competition among coffee suppliers.

Weather Impacts on Production: The report highlights the continuing threat posed by adverse weather patterns due to El Nino, impacting not only Brazil but also Colombia. The expectation of reduced production can create temporary spikes in coffee prices but may also mask deeper supply issues that might affect long-term contracts and pricing strategies for investing companies.

Cofee Export Metrics: Brazil's February green coffee exports showing a 12% drop year-on-year indicates external challenges within the supply chain. On the other hand, an increase in Vietnam coffee exports speaks to robust demand support. However, sustained declines in Arabica production can also reflect pressures on profitability.

Stocks: MDLZ SBUX KDP