Coffee Market Eyes Brazil’s Rainfall Totals With Cautious Optimism

Brazil’s Arabica coffee-growing regions have received more than 160mm of rain since the start of September, putting the rainfall tally for the country’s upcoming on-year crop near totals seen during the same period in 2018, Brazil’s third highest production year. Brazil is the world’s largest Arabica producer and exporter, and higher production tends to occur during an on-year of the biennial crop cycle. 

This strong start to the rainy season has lifted soil moisture levels in coffee-growing areas of Minas Gerais and Sao Paulo, Brazil’s top coffee production states, from their lowest level in 12 years to the middle of their normal historical range, as seen in Gro Climate Risk Navigator. 

Amid these improvements, benchmark coffee prices have dipped 6% to 2.17/lb since September 1. But this brighter outlook for Brazil’s crop could be undercut by a forecast for a third consecutive La Niña. 

Currently, La Niña, which typically delivers below-normal rainfall totals to Brazil’s coffee-growing regions, has a 91% chance of sticking around through November and a 54% chance of lingering from January through March. 

During the last two growing seasons, both La Niña years, challenging growing conditions have hampered Brazil’s coffee production considerably. Record drought and late season frosts in 2021 impacted supplies for the 2022/23 marketing year, which is just finishing now with exports down 14.9% from the previous season. And last September and October, a good start to Brazil’s rainy season gave way to exceedingly dry conditions by mid-December, meaning that the 2023/24 marketing year will start with minimal carryover stocks. 

While coffee producers are guaranteed a minimum price in the coffee-growing regions, exporters and importers have to either absorb higher costs or pass their costs further down the supply chain. Already, many roasters have increased their retail prices this year due to the higher coffee costs. According to the U.S. Bureau of Labor Statistics, average retail ground coffee prices rose to a peak of $6.34/lb in August, up 31.9% from a year earlier. 

As the growing season progresses, Gro users can use the Climate Risk Navigator for Agriculture to monitor growing conditions and to see if La Niña brings dry conditions back to Brazil’s main coffee-growing regions.