Coffee Prices Surge on Brazil Dryness and Tighter Global Supplies

December arabica coffee (KCZ25) on Friday closed up +10.75 (+2.78%), and November ICE robusta coffee (RMX25) closed up +80 (+1.77%).

Coffee prices rallied sharply on Friday, with arabica posting a 4-month high and robusta posting a 1.5-week high.  The lack of rain in Brazil’s coffee-growing regions ahead of the critical flowering period for coffee trees is underpinning coffee prices.  Somar Meteorologia reported Monday that Brazil’s largest arabica coffee-growing area, Minas Gerais, received no rain during the week ended September 6.

Strength in the Brazilian real is bullish for coffee prices as the real (^USDBRL) on Friday rallied to a 15-month high against the dollar.  The stronger real discourages export sales from Brazil’s coffee producers.

Concerns about tighter US coffee supplies due to tariffs are bullish for prices.  American buyers are voiding new contracts for purchases of Brazilian coffee beans due to the 50% tariffs imposed on US imports from Brazil, thereby tightening US supplies, as about a third of America’s unroasted coffee comes from Brazil.

Coffee prices also have support from tighter ICE coffee inventories.  ICE-monitored arabica inventories fell to a 16-month low of 669,2251 bags on Friday.  ICE robusta coffee inventories fell to a 2-week low Friday at 6,557 lots, just above the 7-week low of 6,552 lots from August 28.

Coffee prices found support last Thursday after Conab, Brazil’s crop forecasting agency, cut its Brazil 2025 arabica coffee crop estimate by -4.9% to 35.2 million bags from a May forecast of 37.0 million bags.  Conab also cut its total Brazil 2025 coffee production estimate by -0.9% to 55.2 million bags from a May estimate of 55.7 million bags.

News of reduced coffee exports is supportive for prices after the International Coffee Organization (ICO) last Wednesday reported that global July coffee exports fell -1.6% y/y to 11.6 million bags, and cumulative Oct-Jul coffee exports fell -0.3% y/y at 115.615  million bags.

Harvest pressures in Brazil are bearish for coffee prices after Brazil’s Cooxupe coffee co-op announced Tuesday that the harvest among its members was 97% complete as of September 5.  Cooxupe is Brazil’s largest coffee cooperative and Brazil’s largest exporter group.  Separately, Safras & Mercado reported on August 22 that Brazil’s overall 2025/26 coffee harvest was 99% complete as of August 20, ahead of the comparable level of 98% last year.  The breakdown…