Brazil’s 2025/26 Coffee Output Forecast: A Boon or a Brewed-Up Headache?
2min read Brazil, the world’s largest coffee producer, is projected to harvest 62.8 million bags of coffee during the 2025/26 season, according to Rabobank’s latest agricultural report. This forecast signals a rebound from 2024’s weather-disrupted yields, but investors must parse the nuances of climate, geopolitics, and market dynamics to gauge the true opportunity—or risk.
The Forecast in Context
Brazil’s 62.8 million-bag estimate represents a 4% increase from the previous season’s 60.4 million bags, driven by favorable weather recovery and farmer adaptations to climate challenges. However, this growth is tempered by lingering risks:
1. Climate Volatility: The Double-Edged Sword
The 2025/26 outlook assumes a mild La Niña pattern, which typically brings rain to Brazil’s coffee-growing regions after the droughts of 2024. However, Rabobank warns that prolonged dry spells in key states like São Paulo and Paraná could still disrupt flowering cycles, a critical stage for yield determination.
Historically, Brazil’s coffee output has been volatile. A 2024 drought slashed yields by 12%, pushing global arabica prices to $2.50/lb, a 10-year high. Should 2025/26 see another weather shock, prices could spike again—but if the harvest meets expectations, oversupply could drag prices back toward the $1.50/lb range seen in 2023.
2. Geopolitical and Trade Crosscurrents
The U.S.-China trade war and EU deforestation regulations loom large. While Brazil’s farmers benefit from China’s insatiable demand for robusta beans, U.S. tariffs on Brazilian agricultural exports (proposed under a Trump administration) could disrupt trade flows. Meanwhile, EU regulations mandating deforestation-free supply chains may pressure Brazilian producers to adopt costlier sustainability practices.
3. The Sustainability Squeeze
Brazil’s coffee sector faces rising input costs, including fertilizers and labor, which have increased by 18% since 2021. Smaller farms, already struggling with climate impacts, may consolidate, favoring large-scale producers like JDE Peet’s (DEP) or Nestlé (NESN), which control 30% of global coffee processing.
Market Implications for Investors
- Coffee Producers: Companies like Safra SA (SAFRA) and Bradespar (BRAP4), which have exposure to Brazilian agriculture, could benefit from stable prices. However, their margins depend on hedging against weather risks.
- Retailers and Roasters: Firms like Starbucks (SBUX) and Dutch Bros (BROS) might see cost relief if prices drop, but they must navigate supply chain disruptions from geopolitical tensions.
- Commodity Funds: ETFs like the iPath Bloomberg Coffee Subindex Total Return ETN (JO) track coffee futures and could offer exposure to price swings.
The Bottom Line: A Balanced Brew
Rabobank’s 62.8 million-bag forecast hinges on Brazil’s ability to stabilize production amid climate and policy uncertainty. Investors should:
- Monitor Weather Forecasts: Track rainfall in Minas Gerais and São Paulo via platforms like NOAA.
- Watch Geopolitical Tensions: U.S. trade policy shifts and EU regulatory deadlines (e.g., the EU Deforestation Regulation’s 2025 implementation) could upend supply chains.
- Assess Input Costs: Rising fertilizer prices and labor shortages may limit yield growth even if weather cooperates.
Conclusion
Brazil’s 2025/26 coffee harvest is a critical pivot point. At 62.8 million bags, it could ease global supply shortages and stabilize prices—but only if weather and policy risks are mitigated. Rabobank’s analysis underscores that investors should proceed with caution:
- Upside: A bumper crop could reduce prices, benefiting roasters and retailers.
- Downside: A 5% yield shortfall (to ~59.7 million bags) could push prices back above $2/lb, favoring producers but squeezing margins for downstream companies.
With climate volatility and trade wars as constants, Brazil’s coffee sector remains a high-reward, high-risk bet. For now, the cup is half full—or half empty—depending on the weather.
JR Research
Data as of Q3 2024. Forecasts are subject to revision based on real-time events.
