Tag: Brazil drought

Arabica Rebounds: Brazil Drought Fears Drive Price Surge Despite Tariff Removal Pressure

Posted on by Qahwa World

Dubai – Qahwa World

Arabica coffee futures experienced a strong rally today, Monday, fueled by renewed concerns over Brazil’s current crop conditions. This upward movement reflects the market’s conflicting forces, which are still reacting to the executive order on tariff removal issued late last week.

March Arabica coffee futures (KCH26) surged by $7.40 (+2.00%) today, following a report highlighting alarming dry conditions in Brazil. Somar Meteorologia reported that Minas Gerais, the country’s largest Arabica-growing state, received only 26.4 mm of rain in the week ended November 21, amounting to just 49% of the historical average. This significant rainfall deficit raises concerns about the health and development of the current crop, providing strong support for the market price.

Further bolstering the price are shrinking stockpiles. ICE-monitored Arabica inventories have fallen to a 1.75-year low of 398,645 bags. This inventory drawdown is a direct consequence of previously imposed US tariffs on Brazilian coffee imports, which led American buyers to void new contracts, severely tightening US supplies, as Brazil typically supplies about a third of America’s unroasted coffee.

Despite today’s rally, prices remain near the 7-week low recorded in the previous session. That sharp decline was triggered by the US President signing an executive order late last Thursday, exempting Brazilian agricultural products, including green coffee, from the existing 40% tariffs. This tariff removal, which does not cover instant coffee, created immediate downward pressure as traders anticipated a greater influx of Brazilian supply into the US market.

Longer-term expectations for Brazil’s next crop continue to act as a bearish factor. StoneX analysts last week forecast that Brazil will produce 70.7 million bags of coffee in the 2026/27 season, including 47.2 million bags of Arabica, representing a projected 29% year-on-year increase. Furthermore, Climatempo forecasts suggest heavy rainfall will continue in growing regions this week, providing favorable growth conditions for the subsequent crop.

In the Robusta market, January futures (RMF26) edged lower by 12 points (-0.27%), pressured by forecasts for drier weather in Vietnam. Improved dry conditions are expected to allow the resumption of the Robusta harvest in key provinces like Dak Lak, easing supply delay concerns in Vietnam, the world’s largest Robusta producer. Official data previously showed that Vietnam’s coffee exports for January through October 2025 rose 13.4% year-on-year.

Brazil’s Dryness Continues to Fuel Global Coffee Price Surge

Posted on by Qahwa World

Dubai, September 12, 2025 – Qahwa World – Global coffee markets surged sharply on Friday, with December arabica futures climbing +10.75 cents (+2.78%) to a four-month high and November robusta futures rising +$80 (+1.77%) to a one-and-a-half-week peak.

The rally is being driven primarily by ongoing drought in Brazil, the world’s largest coffee producer. Weather agency Somar Meteorologia reported that Minas Gerais, Brazil’s largest arabica-producing state, received no rainfall during the week ending September 6 — a critical period just ahead of the flowering stage for coffee trees.

A stronger Brazilian real added further bullish momentum, rallying to a 15-month high against the US dollar on Friday. A stronger real typically discourages coffee exports, as producers are less incentivized to sell abroad.

In the United States, concerns over tighter supplies are mounting as buyers cancel new contracts for Brazilian beans following the imposition of 50% tariffs on imports. Roughly one-third of America’s green coffee supply comes from Brazil, making the tariffs a significant disruptor for the US market.

Tightness in ICE-monitored inventories has also supported prices. Arabica stocks fell to a 16-month low of 669,251 bags, while robusta inventories declined to a two-week low of 6,557 lots.

Adding to the bullish outlook, Brazil’s crop forecasting agency Conab cut its 2025 arabica production estimate by -4.9% to 35.2 million bags from its May forecast of 37 million. Total Brazilian coffee output for 2025 was also revised lower by -0.9% to 55.2 million bags.

On the trade side, the International Coffee Organization (ICO) reported that global exports in July fell -1.6% year-on-year to 11.6 million bags. Cumulative exports from October to July slipped -0.3% year-on-year to 115.6 million bags.

Brazil’s July shipments added more pressure to the supply side. The Trade Ministry reported that unroasted coffee exports dropped -20.4% year-on-year to 161,000 metric tons. Exporter group Cecafe confirmed a steeper fall, with green coffee exports plunging -28% to 2.4 million bags. Arabica exports dropped -21% while robusta exports plunged -49%. Cecafe added that total July shipments fell -28% to 2.7 million bags, while cumulative January–July exports fell -21% to 22.2 million bags.

Meanwhile, Brazil’s harvest is nearly complete. Cooxupé, the country’s largest coffee cooperative, reported that 97% of its members’ harvest was completed by September 5. Separately, consultancy Safras & Mercado noted that the national 2025/26 harvest reached 99% by August 20, including 100% completion of robusta and 98% of arabica.

In Vietnam, the world’s second-largest producer, 2023/24 coffee output fell -20% year-on-year to 1.47 million metric tons, the smallest crop in four years. Exports in 2024 fell -17.1% to 1.35 million metric tons. However, the General Statistics Office reported that January–August 2025 exports rose +7.8% to 1.14 million metric tons.

Looking ahead, the USDA’s Foreign Agricultural Service (FAS) projected on June 25 that global coffee production in 2025/26 will rise +2.5% year-on-year to a record 178.68 million bags. The forecast includes a -1.7% decline in arabica to 97.02 million bags and a +7.9% increase in robusta to 81.65 million bags. Brazil’s 2025/26 crop is expected to rise +0.5% to 65 million bags, while Vietnam’s production is forecast to grow +6.9% to 31 million bags, a four-year high. Global ending stocks are forecast to rise +4.9% to 22.8 million bags, up from 21.7 million in 2024/25.

However, trader Volcafe has issued a more cautious outlook, projecting a global arabica deficit of -8.5 million bags in 2025/26, compared with a -5.5 million bag deficit in 2024/25. This would mark the fifth consecutive year of deficits for arabica, underscoring structural supply concerns.

The combination of Brazil’s drought, lower exports, shrinking inventories, and global trade pressures highlights the fragility of the balance between supply and demand — setting the stage for further volatility in one of the world’s most important agricultural commodities.

Coffee Prices Surge on Dry Weather in Brazil and Tighter U.S. Supplies

Posted on by Qahwa World

Dubai, 21 August 2025 (Qahwa World) – Coffee prices continued their sharp rally this week, reaching multi-month highs as drought in Brazil, tighter U.S. supplies, and falling inventories combined to fuel bullish sentiment in global markets. September arabica coffee (KCU25) closed up +4.05 cents (+1.14%), while September robusta coffee (RMU25) jumped +236 points (+5.35%), marking the strongest levels for arabica in more than two months and for robusta in two and a half months. The upward trend has now extended for over two weeks, signaling growing concerns among traders and roasters alike.

Much of the momentum is driven by weather conditions in Brazil, the world’s largest producer. Somar Meteorologia reported that Minas Gerais, the country’s main arabica-growing state, received no rainfall during the week ending August 16. Dry conditions at this stage of the harvest have spurred funds and speculators to increase their positions in coffee futures. While dryness helps in harvesting ripe cherries, prolonged lack of rain threatens the health of trees and could affect the next cycle’s yield, especially for arabica, which is more sensitive to climatic stress.

At the same time, the United States, one of the biggest coffee importers, is facing its own supply squeeze. Following the imposition of 50% tariffs on Brazilian coffee exports, American buyers have been avoiding new contracts and seeking loopholes in existing ones to escape the higher levies. Some have even requested extended shipping timelines in hopes that trade restrictions may eventually ease. With about a third of unroasted coffee consumed in the U.S. normally sourced from Brazil, the tariffs have significantly tightened the market.

Export figures from Brazil reinforce the tightening picture. The country’s Trade Ministry reported that unroasted exports in July dropped -20.4% year on year to 161,000 metric tons, while Cecafé, the exporters’ council, confirmed that green coffee exports fell -28% to 2.4 million bags. Within that total, arabica shipments declined -21% and robusta plunged nearly -49%. Overall, Brazil’s coffee exports in July fell to 2.7 million bags, and shipments for the first seven months of the year were down -21% to 22.2 million bags compared to the same period in 2024.

Another layer of support for prices comes from declining inventories on the Intercontinental Exchange (ICE). Arabica stocks dropped to a 1.25-year low of 726,661 bags last week before inching up slightly, while robusta inventories sank to a three-week low of 6,732 lots, still well below the two-year high reached in late July.

Even as supply pressures mount, Brazil’s harvest progress offers a short-term counterbalance. Cooxupé, the country’s largest cooperative and exporter, announced that its members had harvested 86.1% of their crop by August 15. Independent consultancy Safras & Mercado placed national progress at 94% complete, with nearly all robusta and more than 90% of arabica cherries already picked. This suggests that near-term supply will remain steady, though the longer-term outlook is clouded by weather concerns.

Globally, the International Coffee Organization (ICO) reported that exports in June rose +7.3% year on year to 11.69 million bags, though cumulative shipments for October through June were nearly flat at 104.14 million bags, down -0.2% compared to the previous year. Meanwhile, in Vietnam, the world’s largest robusta producer, production in 2023/24 fell -20% to 1.472 million metric tons, the smallest harvest in four years, due to severe drought. Exports for 2024 slipped -17.1% to 1.35 million metric tons, and the Vietnam Coffee and Cocoa Association has already cut its production forecast for 2024/25 to 26.5 million bags, down from an earlier estimate of 28 million. Yet, despite these challenges, Vietnam’s exports in the first seven months of 2025 rose +6.9% to 1.05 million metric tons, providing some temporary relief to the international market.

Looking ahead, projections from the U.S. Department of Agriculture’s Foreign Agricultural Service (FAS) suggest that world coffee production in 2025/26 will increase +2.5% year on year to a record 178.68 million bags. Arabica output is expected to fall -1.7% to 97.02 million bags, while robusta is forecast to rise +7.9% to 81.65 million bags. Brazil is projected to produce 65 million bags (+0.5%), and Vietnam is forecast to reach a four-year high of 31 million bags (+6.9%). Ending stocks are expected to climb by nearly +4.9% to 22.82 million bags. Still, major trader Volcafe has warned of a widening deficit in arabica, projecting a shortfall of -8.5 million bags for 2025/26, compared with -5.5 million bags this year. If accurate, this would mark the fifth consecutive year of arabica deficits, ensuring that upward pressure on prices will likely persist well into next year.