Futures contracts on Arabica coffee futures have risen by 32% in a month and 70% year to date amid mounting supply chain pressures.
Brazil, the world’s biggest coffee producer, faced severe drought earlier this year, raising doubts about the next season's crop size.
The USDA's Foreign Agricultural Service predicts Brazil's 2024/25 coffee production at 66.4 million metric tonne (MMT), below the USDA's previous forecast of 69.9 MMT.
The FAS estimates Brazil's coffee inventories at 1.2 million bags at the end of the 2024/25 season in June, down 26% over the previous season.
Weather disruptions have also hit Vietnam, which is a key producer of the robusta bean variety.
"The price trend is now very similar to that of cocoa at the beginning of the year. The reasons are also comparable," said Commerzbank analysts.
"In the case of cocoa, it was poor harvests in the two most important producer countries, Ivory Coast and Ghana. In the case of arabica coffee, it is concern about a poor crop in Brazil, the most important producer country, next year due to drought.”
At the time of writing, Arabica coffee futures were priced at $3.25 a pound, the highest on record.
Arabica futures prices over the past 50 years – Source: tradingeconomics.com