(Bloomberg) -- Volcafe Ltd., one of the world’s biggest coffee traders, cut its outlook for Brazil’s arabica production after a crop tour revealed the severity of an extended drought in the world’s top grower.
Brazil is seen producing just 34.4 million bags of the premium arabica bean in the coming season, down by about 11 million bags from a September estimate, according to a presentation seen by Bloomberg News. That puts global coffee production on track to fall short of demand by 8.5 million bags in the 2025-26 season, marking an unprecedented fifth year of deficits, it said.
Arabica coffee futures traded in New York hit a record high on Tuesday, rallying as much as 5.5%. They’ve surged more than 80% this year on concerns over the drought’s impact in Brazil, threatening to further raise drink prices for consumers.
Brazil “had the potential of moving the global supply and demand equilibrium back into a much-needed surplus,” Volcafe said. “However, the results of our crop tour indicate significantly high levels of blossom failure.”
The estimates are based on a crop tour of 1,850 sample farms, which showed “the stark impact” of weather on coffee trees, according to the report. A prolonged drought from April to September depleted soil moisture, caused leaves to fall off trees and prevented blossoming. Trees that did grow blossoms failed to flower and develop further.
The outlook for 2025-26 is worse than for the current season, in which Brazilian arabica production is expected to be 43.3 million bags, resulting in a global deficit of 5.5 million bags. A bag weighs 60 kilograms (132 pounds).
“The loss of Brazil’s 2025-26 arabica crop is a critical flag to the outlook for the market structure,” Volcafe said. Certified stockpiles held by the futures exchange are now unlikely to rise above a target threshold that would have helped the market move into a structure where current prices are lower than future prices.
Tightness in the arabica market was also driven by higher demand following a shortage of robusta beans earlier this year, which could push inventories to “untenable levels” below five-months worth of consumption by the second quarter of 2025, Volcafe said. That is poised to support a shift back to robusta in the medium term, potentially supporting prices of the cheaper variety.
Volcafe also lowered its outlook for Brazil’s 2025-26 robusta crop by 1.5 million bags to 24 million bags following the drought, though higher prices for the variety are broadly seen boosting the country’s production. Global robusta production in the upcoming season is seen at a 1.2 million-bag surplus, following four years of deficits. Robusta futures in London rose as much as 6% on Tuesday.
(Updates from eighth paragraph with more crop outlook details)
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