Arabica coffee prices hit record highs on Tuesday as dealers fretted over Brazil's crop outlook after Volcafe, one of the world's largest coffee 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 barristas - will produce just 34.4 million bags of the bean next season, according to a Volcafe report seen by Reuters.
The forecast has been cut by 11 million bags thanks to a high level of blossom 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 top robusta producer Vietnam.
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 consumers 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 benchmark to price physical coffee around the world, hit $3.4835 per lb earlier on Tuesday, their highest ever levels. By 1343 GMT, they were trading up 4.3% at $3.4440 per lb.
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 - lower-end beans typically used to make instant coffee - are to some extent inter-changeable, so more availability of robusta can work to ease a shortage of arabica.
ICE robusta coffee LRCc2 futures hit a day's high of $5,510 a ton earlier, still short of last week's peak of $5,694 (€5,419), which was the highest in 47 years when compared with prices from the International Coffee Organisation.
The contracts later traded up 3.9% at $5,403 a metric 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 mln 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% to 8,350 pounds per ton, after scaling its highest since late-April to 8,382, while New York cocoa CCc2 rose 4.1% to $10,495 a ton.
March raw sugar SBc1 fell 2.8% to 20.88 cents per lb, while March white sugar LSUc1 fell 3.1% to $537.90 a ton.
