Coffee Prices Surge Amid Brazil Drought Fears and US Supply Tightness
Coffee prices have surged, with robusta reaching a 1.5-week high, driven by concerns about the 2026/27 crop in Brazil and tight supplies in the US. Meanwhile, heavy rains in Vietnam threaten coffee farms and roads, and global exports have dipped.
The National Oceanic and Atmospheric Administration (NOAA) has raised the likelihood of a La Niña weather system to 71%, which could bring excessive dry weather to Brazil, harming the 2026/27 coffee crop. This has sparked fears of supply shortages and contributed to the price increase. In Vietnam, heavy rains in the Central Highlands are expected to cause flooding, keeping farmers out of their fields and potentially damaging crops.
American buyers are voiding new contracts for Brazilian coffee beans due to 50% tariffs, further tightening US supplies. This has led to a sharp drawdown in ICE coffee inventories, with arabica inventories falling to a 1.5-year low and robusta inventories reaching a 2.25-month low. The reduced inventories, coupled with strong demand, have pushed coffee prices higher. December arabica coffee closed up +9.05 (+2.41%), and November ICE robusta coffee closed up +203 (+4.83%).
The International Coffee Organization (ICO) reported that global July coffee exports declined -1.6% year-over-year (y/y) to 11.6 million bags, and cumulative October-July coffee exports fell -0.3% y/y to 115.615 million bags. Despite the recent dip, prices have been buoyed by concerns about future supplies.
Coffee prices have recovered from early losses and moved sharply higher due to weather concerns in Brazil, tight supplies in the US, and reduced global exports. The main suppliers of Arabica coffee in 2025 are expected to be Ethiopia and Indonesia, while Robusta coffee production is forecasted to increase mainly in Vietnam and Indonesia. However, the impact of La Niña on Brazil's coffee crop remains a significant uncertainty.
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