Coffee traders await Brazilian beans as farmers hold back

Coffee traders are betting Brazil’s record harvest will ease a global supply crunch, but farmers in the world’s top grower are in no hurry to sell beans, squeezing supplies in consuming countries.

Brazil is expected to harvest a record 75.3 million bags of coffee in the current season, while inventories in U.S. and European exchange warehouses are at the lowest level since March 2024. That dynamic has fueled volatility in the futures market, as traders balance expectations of a record crop with persistent tightness and a slower-than-expected pace of producer selling.

The July arabica contract traded at a premium of about 10 cents a pound to September on Monday, one of the clearest signs that nearby supplies remain scarce.

Growers typically presell part of future production to help cover input costs while also hedging to shield from negative price swings. But they don’t need to sell much supply upfront this year, having profited significantly from recent market rallies. Arabica futures had been steadily climbing since mid-2023 and peaked twice at all-time highs above $4 a pound last year. Prices have now plunged about 40% from those levels, providing little incentive to sell.

“The winds are blowing in favor of farmers,” who are “not feeling pressured” to start selling their coffee, said Simão Pedro de Lima, chief executive officer of Expocacer, a cooperative in Cerrado Mineiro.

Just over 20% of the arabica beans expected to be harvested in the current season were sold as of June 11, while robusta sales were at 14%, according to a monthly survey by Safras & Mercado. Under normal conditions, farmers sell between 30% and 40% of their arabica new crop at the start of the season, Lima said.

Sales of new-crop robusta in Espírito Santo state also lagged at 10%, a third of last season’s levels and a fourth of the historical average, said Edimilson Calegari, trade manager at farm cooperative Cooabriel, which sources coffee from some 10,000 farmers and mainly sells their produce domestically.

The market has also started reacting to concerns over depleted exchange stockpiles and the El Niño weather event that just took effect. The most-active arabica contract last Thursday touched the highest in about three weeks before erasing gains.

A strong El Niño could reduce rains during coffee’s flowering period, which for robusta is typically between July and September. Worse, it could also affect rainfall during grain filling in November, December and January, which happened between 2023 and 2024 and caused steep losses, Calegari said.

The weather pattern and recent disruptive rains over Brazil’s arabica belt have been supportive for the market, said Carlos Mera, the head of agricultural commodities market research at Rabobank⁠. Both the July and September delivery windows “will likely bring a lot of volatility” to the futures market, he said.

Producers’ reluctance to close deals, even with the harvest underway, “has delayed the large volume flows that the market expected to be seeing by now,” said StoneX Group analyst Leonardo Rossetti. It’s not just Brazil, he added. Farmers in Vietnam, the world’s top robusta grower, and Indonesia have also held back on sales amid lower coffee prices. But that poses risks too, as the eventual arrival of the record Brazilian harvest in July and August is likely to add pressure to prices, he said.

“The coffee exists … but it might take a little longer to ship,” Marcelo Moreira, an analyst with Archer Consulting, said of crops from both Brazil and other key producing nations. “There is no reason to panic.”