Insufficient Rain in Brazil Bolsters Coffee Prices Amid Supply Concerns

Insufficient rain in Brazil is driving moderate gains in coffee prices, significantly influencing arabica and robusta varieties. The Brazilian real’s strength against the dollar impacts export strategies, while supply concerns persist due to reduced exports and forecasted production declines. A mix of local and global market reports indicates a complex landscape for coffee pricing moving forward.

Coffee prices experienced moderate gains on Wednesday due to dry conditions in Brazil and the strengthening of the Brazilian real. May arabica coffee (KCK25) rose by +7.25 or 1.89%, while May ICE robusta coffee (RMK25) increased by +58 or 1.06%. According to Somar Meteorologia, the Minas Gerais region, which is Brazil’s largest arabica coffee growing area, received only 30.8 mm of rain, representing a mere 71% of the average rainfall for that week.

The Brazilian real achieved a 4-1/2 month high against the US dollar, which lessened export selling pressure among Brazil’s coffee producers. In contrast, gains in robusta coffee prices were limited by increased supplies; ICE-monitored robusta coffee inventories reached a one-week high of 4,336 lots, while arabica inventories dropped to a three-and-a-half-week low of 782,648 bags.

Concerns about supply continue to bolster coffee prices. Cecafe reported a 12% year-over-year decrease in Brazil’s green coffee exports in February, totaling 3 million bags. Additionally, Brazil’s government crop forecasting agency, Conab, has forecasted a 4.4% decline in the 2025/26 coffee crop, projecting a three-year low of 51.81 million bags.

Conversely, Marex Solutions has indicated that the global coffee surplus for the 2025/26 season is expected to widen significantly to 1.2 million bags. Furthermore, a report from Vietnam’s General Statistics Office indicated that the country, the foremost producer of robusta coffee, saw a 6.6% year-over-year increase in February coffee exports, reaching 169,000 MT.

The impact of El Niño-induced dry weather over the past year may have long-term detrimental effects on coffee production in South and Central America. Brazil has recorded below-average rainfall since April, which has adversely affected coffee plants during their crucial flowering stage. This situation raises concerns for the 2025/26 arabica coffee crop.

Robusta coffee prices are supported by reduced production in Vietnam, which experienced a 20% decline this crop year to 1.472 million metric tons, marking the lowest output in four years. The USDA FAS has projected a slight decrease in Vietnam’s robusta production for the 2024/25 marketing year, along with a holding steady of coffee exports.

Positive news regarding coffee exports adds uncertainty to price expectations. Conab reported record coffee exports from Brazil for 2024, rising by 28.8% year-over-year to 50.5 million bags. However, the International Coffee Organization reported a year-over-year decline in global coffee exports for December of 12.4%.

The USDA’s biannual report indicates a mixed outlook for coffee prices. While world coffee production is expected to increase by 4% in 2024/25, projected ending stocks are anticipated to fall to a 25-year low. Brazil’s coffee production estimate has also been lowered, signaling ongoing concerns due to drought conditions.

Volcafe has reduced Brazil’s arabica coffee production estimate for the 2025/26 marketing year to 34.4 million bags, down approximately 11 million bags from earlier forecasts. This adjustment highlights the substantial risk of a widening supply deficit, with expectations for a significant arabica deficit for the upcoming season.

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In conclusion, Brazilian coffee prices are currently being influenced by adverse weather conditions and the strengthening of the Brazilian real, which discourages exports. Although concerns about supply persist, mixed reports indicate a complex coffee market with varying influences, particularly from other major producers. Long-term predictions suggest potential deficits in arabica coffee production, prompting a keen eye toward future crop estimates and export inventories.

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