The expected decrease in supply from Brazil pushed market prices back to peak levels last week.
March Arabica coffee closed the weekend session up 6.40 cents/pound at 302.10 cents compared to last week, an increase of 18.8 cents/pound. Meanwhile, the price of Robusta coffee based on January 2025 this week closed at $4,985, up to $212 compared to $4,773/ton last week.
Both markets had their third consecutive week of increases as the FAS agency, which specializes in foreign agricultural seasonal issues, under the US Department of Agriculture, forecast Brazil’s 2024/25 coffee output at 66. .4 million bags, lower than their own previous forecast of 69.9 million bags. FAS also forecasts Brazilian coffee inventories at 1.2 million bags at the end of the 2024/25 season in June, down -26% year-on-year.
It should be noted that according to Conab, Brazil’s crop forecasting agency, has also cut its production forecast for the 23/24 season to 54.8 million bags compared to May’s forecast of 58.8 million bags. .
Concerns about long-term damage to the coffee crop due to Brazil’s drought conditions and persistently lower than average rainfall in Brazil are also persistent factors in this market’s price increase.
In addition, the scarce supply of robusta along with a report from the General Department of Vietnam Customs saying last Monday that Vietnam’s coffee exports in October decreased by 11.6% over the same period have contributed to this. causing Robusta prices to return to the $5,000/t mark.
Although the weather situation in Brazil has temporarily calmed down recently thanks to the rains, the meteorological agency Somar Meteorologia reported on Monday that rainfall in the Arabica growing region of Minas Gerais state reached 60.9 mm in last week, equivalent to 127% compared to the historical average, but prices did not decrease during the week.
Brazil’s new coffee crop will begin in May, 2025 is gradually developing and the weather so far is largely reported to be favorable. This follows a period of hot, dry weather in Arabica coffee regions in the second and third quarters of this year before the onset of the rainy season, a factor that many market participants are keeping an eye on as this could The possibility of influencing the potential of the 2025/26 Brazilian coffee crop is taking shape.
The US Department of Agriculture has announced an adjustment to its initial forecast for Colombia’s 2024/2025 coffee crop, increasing slightly by 4.03%, to a current level of about 12.90 million bags.
Forecast for the coffee year from October 2024 to September 2025 is estimated global production at 169.50 million bags and global coffee demand at 171 million bags.
Indonesia’s total coffee production (Arabica and Robusta) was also forecast to decrease by 900 thousand bags by the US Department of Agriculture, from 10.90 to 10.00 million bags. The reduction in Robusta coffee production, down from 9.5 to 8.6 million bags, was the main reason for the overall negative adjustment in the country’s output.
Losses in the two main exporting countries, Brazil and Indonesia, were partly offset by an increase in Colombian coffee production.
Overall, these numbers will have limited impact on the market, only confirming the scenario of tighter global coffee supply in the 2024/25 season. However, the biggest expectation is towards the numbers for Vietnam’s crop, which is currently being harvested. The US Department of Agriculture’s June forecast of 29 million bags—of which 27.85 million were robusta—is considered very optimistic and will likely be revised downward, as happened with estimates for the Brazilian crop. Some traders have pointed out that Vietnam’s robusta crop is only about 24 million bags.
Meanwhile, some Vietnamese businessmen who buy directly from farmers said that the amount they buy at the present time is only about 1/5 of the same period of the previous crop. I wonder where the coffee has gone? ??
The current balance between supply and demand is still unbalanced, there is no hope of major changes at least in the near future, so it seems certain that coffee prices will still remain high.
Climate issues continue to pose a global threat, harming coffee production in all major producing countries. There is increasing information about falling flowers in Brazilian coffee plantations and Brazilian coffee growers’ resistance to sell the remaining 2024 crop to the Chinese market. The final months of 2024 were marked by a sharp increase in coffee exchange activity, one analyst said.
The holdings of certified graded Arabica coffee on the New York exchange increased by 14,774 bags on Thursday, reaching 893,325 bags.
Kinh Vu (giacaphe.com)
