Impacts of Drought and Market Movements

The recent coffee market analysis highlights a challenging climate situation in Brazil, where the country is facing the worst drought in 40 years, directly impacting the outlook for the coffee harvest. Despite the severity, the market had already factored in many of these challenges, and the current movement reflects more of a technical correction than a sudden reaction. This is evidenced by the significant drop in Arabica coffee prices, with futures contracts for December 2024 and March 2025 falling by 355 and 310 points, respectively. The price decline is also influenced by the substantial increase in ICE-certified stocks, which have grown significantly compared to the previous year, adding further pressure to the market.

On the other hand, Robusta coffee shows an opposite trend, with rising prices. Futures contracts for November 2024 and January 2025 show consistent increases, which may indicate stronger demand for this type of coffee, possibly in response to uncertainties surrounding Arabica supply. The upward movement in Robusta prices suggests that while Arabica faces downward pressure due to increased availability and technical correction, Robusta benefits from a perception of lower risk or stable demand in the international market.

In the domestic market, the situation is equally complex, with Brazilian producers adopting a cautious stance. Despite the volatility observed on the New York and London exchanges, domestic prices for Arabica and peeled cherry coffee show specific variations, reflecting the producers' hesitation to sell large quantities amid uncertainties regarding the 2025 harvest. This defensive posture by producers, who prefer to sell the minimum necessary to ensure security in future negotiations, indicates a heightened perception of risk concerning the climate and price volatility, which could impact Brazil's export strategies and flow in the coming months.

Source: Notícias Agrícolas