Why coffee prices are brewing for a steep decline?

Arabica coffee futures are projected to drop by approximately 30% by the end of 2025, according to a poll conducted by Reuters on Friday. 

This decline is attributed to expectations of a bumper Brazilian crop next year and recent record-high prices, which are anticipated to dampen demand.

The median forecast for arabica prices at the end of 2025 was $2.95 per pound, according to the poll.

This represents a 30% drop from Wednesday's closing price and a 6% loss from the end of 2024.

One participant in the poll of 12 traders and analysts said:

The poll's median forecast for Brazil's 2025-26 arabica coffee crop was 40.55 million bags. This represents a decrease from the previous season's 43.4 million bags.

The surge in coffee prices can be attributed to several factors, with a primary driver being the anticipation of a reduced arabica coffee harvest in Brazil, the world's leading producer, during the forthcoming 2025-26 season. 

Imbalance in market

This decrease in supply is expected to create a significant imbalance in the global coffee market, leading to heightened competition among buyers and ultimately driving up prices.

Several factors could be contributing to the projected decline in Brazil's arabica coffee production. 

The potential impact of a smaller arabica crop in Brazil extends beyond the immediate rise in prices. 

It could also lead to a tightening of global coffee supplies, potentially resulting in shortages in some regions. 

This could have a cascading effect on the coffee industry, affecting roasters, retailers, and consumers alike. 

Roasters may be forced to increase their prices to offset the higher cost of coffee beans, while retailers may face difficulties in securing sufficient supplies to meet consumer demand. 

Consumers, in turn, may be forced to pay more for their daily cup of coffee or seek out alternative beverages.

Larger yield possible next season

However, several participants indicated that a larger Arabica crop yield is possible for the 2026-27 season.

"If we can get through the frost/rain period without damage, there should be a massive 26/27 Brazil crop on the horizon," another participant said.

Arabica coffee prices, which rose approximately 70% in 2024, were among the best performing commodities last year. 

This year, prices have continued to climb, reaching a record high of $4.2995 on February 11.

The total crop of Brazil is projected to decrease to 64.6 million bags in 2024-25 from 66.4 million bags. 

This decline is due to a decrease in arabica production, which is partially offset by a rise in robusta (conillon) production.

Robusta coffee prices are forecasted to decline by 28% from Wednesday's close to $4,200 a metric ton by the end of 2025. This would result in an annual loss of 14%, according to the poll.

The 2025-26 robusta crop in Brazil is projected to increase to 24.5 million bags, compared to 21 million bags in the 2024-25 season.

The top robusta producer, Vietnam, is expected to have a larger harvest of 29 million bags in 2025-26, compared to 28 million in 2024-25.

One participant said: