Drought stricken coffee plants in Brazil. Photo credit: Judith Ganes.
Coffee trade giant Volcafe predicts Brazil will produce less than 35 million 60-kilo bags in the 2025/26 season, revising the September estimate downward by 11 million bags to 34.4 million 132-pound bags.
The predicted 8.5 million bag shortfall marks a fifth year with demand outpacing arabica production. Global demand exceeded output by 5.5 million bags in 2024/25. Arabica coffee futures soared on the news. Prices have surged more than 80% this year.
Reuters reported that Volcafe initially thought Brazil “had the potential of moving the global supply and demand equilibrium back into a much-needed surplus.” According to Volcafe, a crop tour of 1,850 sample farms showed “the stark impact” of weather on coffee trees.
Volcafe described “significantly high levels of blossom failure” following a six-month drought that began in April. Reuters writes that Volcafe’s outlook for 2025/26 is worse than for the current season. Brazilian arabica production is expected to be 43.3 million bags.
Coffee consultant Judith Ganes toured the coffee areas for 10 days in late October. “Areas I visited three years prior when there was a prior drought were under greater stress now than they were then. There was also more skeletonizing, with farmers deciding to chop off the branches, realizing they would not produce a sufficient crop to cover the cost of upkeep and mechanized harvesting.
Pruning will lower yields in 2025/26 but sets the stage for a strong recovery in 2026/27 after the tree is better rested, explains Ganes who owns J Ganes Consulting Research Reports.
Trees can self-correct based on conditions like the heavy rains that finally arrived in October. Ganes said that good soil moisture causes the cherries on the trees to size well and partially compensates for the reduced volume of cherries.
Volcafe also lowered its outlook for Brazil’s 2025/26 robusta crop by 1.5 million bags to 24 million bags. Globally robusta producers are expected to exceed demand by 1.2 million bags after four years of deficits.
Brazil's crop forecasting agency, Conab, cut its 2024 Brazil coffee production forecast on September 19 to 54.8 million bags from May's forecast of 58.8 million bags.
Vietnam is also experiencing adverse weather conditions, flooding fields delaying the harvest that is now underway. Colombia is recovering slowly from an El Nino-triggered drought early this year. According to meteorologists, Brazil is experiencing its driest weather since 1981.
A timeline of what stopped bull market moves in their tracks:
1977: consumers threatened to boycott purchasing coffee, accusing producers of intentionally holding back supplies
1985: Brazil's drought ended, and the producer had a mountain of coffee to cover the shortfall.
1994: Double frost in Brazil, but consumer stocks were plentiful.
1997: Roasters became more flexible in blends, using more robusta, which was in plentiful supply. The wide arbitrage reflected this.
2011: Surging differentials caused roasters to shift away from Colombian coffee following a 2-year crop problem.
2014/15: Brazil drought ended. More shifting in blends.
2021/22: Brazil delivered large volumes against New York for delivery.
Current: More demand shifting, reducing forward coverage, stretching supplies well in advance of the actual shortfall next season?
Source: J Ganes Consulting Research Reports