The Coffee Market in the Grip of Weather and Empty Warehouses: The Paradox of Record Brazil Harvests
Date: 28 July 2026
Current Market Dynamics
Despite a decline in coffee prices since the start of the year, recent trends indicate a significant upward movement. Arabica futures have surged nearly 10% in just two trading sessions, driven by increasing demand. This rise appears counterintuitive given Brazil's optimistic harvest forecasts, which suggest a record yield exceeding 70 million bags. However, the reality of the market is shaped by immediate conditions rather than future projections.
Record Harvests vs. Current Supply Issues
The USDA's forecast for Brazil's coffee harvest remains optimistic, but other institutions, including Brazil's CONAB, have issued lower estimates. The primary factor contributing to the current price increases is adverse weather conditions that are delaying harvests. In Minas Gerais, Brazil's largest Arabica-growing region, rainfall has reached 2700% of the historical average for this period, complicating harvesting, drying, and transportation processes.
Warehouse Stocks at Critical Levels
Simultaneously, certified Arabica stocks monitored by the ICE exchange have plummeted, with a recent single-day drop of 5.9%, marking a total decline of 26% over 25 trading sessions. Current stock levels are nearing critical lows not seen since the late 1990s, falling below 300,000 bags. This situation is exacerbated by logistical challenges, including tensions in the Red Sea, which have led to increased shipping times and costs.
Market Sentiment and Future Projections
The current price surge is largely attributed to short-term supply panic. However, the El Nino weather phenomenon could lead to excessive rainfall in South America and droughts in Southeast Asia, impacting future coffee crops. The futures market indicates that while immediate supply is a concern, higher production is anticipated in the long term, as evidenced by the widening price spread between September and December contracts.
Conclusion
The coffee market is currently experiencing significant short-term supply concerns, reminiscent of recent cocoa market dynamics. If production continues to rise, it may eventually stabilize stock levels, making it difficult for prices to reach historical highs. The upcoming months will be critical; if prices do not decline as expected once the harvest reaches consumers, it may indicate a tighter physical supply than anticipated.