Arabica coffee prices have risen to their highest on record as dealers fretted over Brazil's crop outlook after one of the world's largest traders slashed its 2025/26 forecast for the country's arabica output.
Brazil, which grows nearly half the world's arabica - high-end beans typically used in roast and ground blends beloved by baristas - will produce just 34.4 million bags of the bean next season, according to trader Volcafe in a report seen by Reuters.
Volcafe's forecast has been cut by 11 million bags thanks to a high level of cherry setting failure following this year's drought.
Volcafe, as a result, sees an "unprecedented" fifth consecutive global coffee deficit in 2025/26 of 8.5 million bags.
"The situation of continuous deficits prevalent since 2021 is largely driven by the inability of Brazil to produce a healthy 'on-cycle' arabica crop back to above 50 million bags, primarily due to climate change," said the trader.
Coffee prices have soared around 80% this year, driven also by worries over the crop outlook in Vietnam, the largest producer of robusta coffee, a type widely used to make instant coffee.
The price gains have boosted potential earnings for farmers but they are challenging traders, who are facing crippling hedging costs on exchanges and a scramble to receive the beans they are owed.
Rising prices are meanwhile prompting some drinkers to switch to cheaper coffee.
The boss of Nestle, the world's biggest coffee firm, was ousted earlier this year after the board grew unhappy about weak sales and a loss of market share as coffee drinkers switched to cheaper brands.
Arabica coffee futures on ICE KCc2, used as a global benchmark, hit $3.4835 a pound yesterday - their highest ever level. They closed 1.2% up at $3.3415 a pound.
Dealers said the Volcafe report had come at a time when the market was already nervous over supplies, but cautioned it might be having an outsized impact, especially with the harvest in top robusta producer Vietnam currently underway.
Arabica and robusta are to some extent inter-changeable, so more availability of robusta can work to ease a shortage of arabica.
The USDA expects Vietnam's robusta crop to rebound to 29 million bags in 2024/25, while Volcafe sees it at 24.5 million bags.
ICE robusta coffee futures hit a day's high of $5,510 a ton, still short of the late November peak of $5,694, the highest in 47 years. Robusta closed 0.6% up at $5,232 a ton.
TRS by Expana, a leading price reporting agency and research firm, sees the total 2025/26 Brazil coffee crop up slightly on an annual basis at just under 70 million bags thanks to a strong robusta crop.
The firm has meanwhile cut its 2025/26 Brazil arabica crop forecast by 2 million bags to 43 million, TRS by Expana's head of research Steve Wateridge told Reuters.
Wateridge, a world expert in tropical commodities, said overall, Brazil's total coffee crop will help the global market record a surplus 7.5 million bags in 2025/26.
"If prices stay at these levels we'll lose demand, that's what we've got to look at," said Wateridge.
In other soft commodities traded, London cocoa futures rose 3.8% to £8,404 a ton, its highest since late-April, while New York cocoa rose 4.7% to $10,557 a ton.
March raw sugar fell 2.1% at 21.04 cents a pound, while March white sugar fell 2.9% at $538.70 a ton.
