Heavy rainfall that delayed Brazil’s coffee harvest and raised concerns about bean quality has driven volatility in global coffee markets this month, even as early yield data reinforce expectations that the 2026/27 crop will help rebuild depleted global inventories.
Itaú BBA said the slower pace of harvesting, drying and processing has postponed the arrival of new-crop supplies, helping push arabica futures in New York up 5.8% in July. The bank said producers should consider hedging strategies to lock in attractive margins while prices remain elevated.
Analysts Marina Marangon and Andrew Giaretta said persistent rainfall, particularly in June, created significant operational challenges across Brazil’s main coffee-growing regions. Besides slowing harvest operations, wet weather delayed drying and processing and increased concerns over bean quality after coffee cherries fell to the ground in parts of southern Minas Gerais, the Cerrado region of Minas Gerais and São Paulo’s Mogiana region.
Arabica futures briefly surged more than 16% in New York on July 6 as the market reacted to concerns over Brazil’s crop before giving back part of the gains as traders took profits. Robusta futures in London followed a similar pattern, rising 4% during the month.
According to Itaú BBA, forecasts for a strong El Niño have also added a weather-risk premium to prices, which should continue to respond to the pace of harvest arrivals and quality assessments.
Harvest data from Cooxupé, Brazil’s largest coffee cooperative, illustrate the slower pace. Harvesting had reached 47.3% of the cooperative’s coverage area this week, compared with 59% a year earlier and a five-year average of 58.3%. Consultancy Safras & Cifras estimated Brazil’s harvest at 64% complete as of July 16, below 77% at the same point in 2025 and the five-year average of 70%.
José Donizeti Alves, a professor at the Federal University of Lavras, said irregular rainfall interspersed with dry spells and sharp temperature swings disrupted crop development, triggering off-season flowering and causing losses of buds, flowers, cherries and leaves. He also cited localized hailstorms and above-average frost events.
Hedging Opportunity
Itaú BBA said the recent rally offers growers an opportunity to protect margins through risk-management strategies.
The bank recommends using derivatives in both input purchases and coffee sales, arguing that improving fertilizer economics for next year and expectations of a recovery in global supply support hedging. One suggested strategy is selling coffee non-deliverable forwards (NDFs) denominated in reais for September or December 2027 contracts, allowing producers to lock in prices while retaining flexibility to market physical coffee closer to harvest.
Global Stocks Set to Recover
Despite harvest delays and lingering quality concerns, Itaú BBA expects the larger Brazilian crop, together with strong production in Vietnam, Colombia and Ethiopia, to replenish global inventories after several years of tight supplies.
Citing U.S. Department of Agriculture estimates, the bank forecasts global coffee production at 190 million 60-kilogram bags in the 2026/27 season, up 6.1% from 2025/26, while consumption is projected at 180 million bags, up 3.6%. That would leave the market with a surplus of 9.9 million bags.
The surplus is expected to lift global inventories to 26 million bags, increasing the stocks-to-use ratio to 15% from 14%, signaling a gradual recovery in availability even though inventories would remain below levels seen at the start of the decade. Brazil’s exportable surplus of green coffee is also projected to increase 29.6% year on year to 49.4 million bags.
This story was translated from the original Portuguese with the assistance of artificial intelligence and reviewed by The AgriBiz editorial staff.
