- The drought in Brazil, especially in the Minas Gerais region, is threatening Arabica crops and driving up coffee prices.
- Conab forecasts indicate lower harvests in Brazil than previously expected.
- Vietnam is also struggling with drought, which is limiting coffee production and exports.
- The Arabica deficit on the global market continues for the fifth year in a row, increasing price pressure.
Brazil’s drought drives up coffee prices
Coffee prices are clearly on the rise, with arabica reaching a one-week high. The main reason for this is the worrying weather conditions in Brazil – the Minas Gerais region, the most important arabica growing area, has seen no rainfall for the entire last week. The drought at a key moment in the flowering of coffee trees is raising concerns about future yields and prompting investors to bid up quotes.
Additional support for prices has been provided by Conab forecasts, which point to a smaller harvest in Brazil than previously expected. The market is also reacting to signs of weaker exports and an increasingly tight global supply chain.
Global factors reinforce coffee market tensions
The pressure on prices is not only being reinforced by Brazil. Vietnam, the world’s second largest coffee producer, is grappling with the effects of a drought that has reduced production and exports. At the same time, in the US, importers are cancelling some contracts for Brazilian beans due to high tariffs, further reducing the availability of coffee in the US market.
Forecasts indicate that global production will at least increase in the coming season, but arabica may remain in deficit. This is the fifth year in a row that the global market for this variety will be under-supplied, which keeps pressure on prices and raises questions about the stability of supply in future years.
