Brazil Drought Continues To Push Coffee Prices Higher – CoffeeTalk

Coffee prices in Brazil have seen moderate gains due to dry conditions and the strength of the Brazilian real. Brazil’s biggest arabica coffee growing area of Minas Gerais received 30.8 mm of rain in the week ended March 15, or 71% of the historical average. The Brazilian real rallied to a 4-1/2 month high against the dollar, discouraging export selling from Brazil’s coffee producers.

Gains in robusta coffee were limited due to increased supplies after ICE-monitored robusta coffee inventories rose to a 1-week high of 4,336 lots. Conversely, ICE-monitored arabica coffee inventories fell to a 3-1/2 week low Wednesday of 782,648 bags.

Continued supply fears are supporting coffee prices. Cecafe reported that Brazil’s February green coffee exports fell -12% y/y to 3 million bags. Conab, Brazil’s government crop forecasting agency, forecasted that Brazil’s 2025/26 coffee crop would fall -4.4% y/y to a 3-year low of 51.81 million bags. Marex Solutions expects the global coffee surplus in the 2025/26 season to widen to 1.2 million bags from +200,000 bags in the 2024/25 season.

A bearish factor for robusta coffee was the March 6 report from Vietnam’s General Statistics Office that showed Vietnam’s Feb coffee exports rose +6.6% y/y to 169,000 MT. The impact of dry El Nino weather last year may lead to longer-term coffee crop damage in South and Central America. Rainfall in Brazil has consistently been below average since last April, damaging coffee trees during the all-important flowering stage and reducing the prospects for Brazil’s 2025/26 arabica coffee crop.

Robusta coffee prices are underpinned by reduced robusta production. Vietnam’s coffee production in the 2023/24 crop year dropped by -20% to 1.472 MMT, the smallest crop in four years. The USDA’s biannual report on December 18 was mixed for coffee prices. The USDA’s Foreign Agriculture Service (FAS) projected that world coffee production in 2024/25 will increase +4.0% y/y to 174.855 million bags, with a +1.5% increase in arabica production to 97.845 million bags and a +7.5% increase in robusta production to 77.01 million bags. The FAS forecasts that 2024/25 ending stocks will fall by -6.6% to a 25-year low of 20.867 million bags from 22.347 million bags in 2023/24.

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