Why Are Coffee Prices Surging? The Supply Crisis Reshaping Global Markets

Coffee prices climbed sharply this week as traders grappled with a perfect storm of supply disruptions threatening the world’s largest producing nations. Here’s what’s driving why coffee prices remain elevated and where the market heads next.

The Heat Wave Factor: Brazil’s Coffee Belt Under Pressure

The immediate trigger came from weather forecasts predicting intense heat across Brazil’s Minas Gerais region—the nation’s dominant arabica coffee-growing zone. March arabica futures jumped +1.48% on Friday, while robusta contracts gained +1.06% earlier in the week. The concern isn’t just about temporary stress; sustained drought conditions could significantly impact this season’s yield.

What makes this timing critical: Brazil, responsible for roughly a third of global coffee supply, is already facing production headwinds. The USDA’s Foreign Agriculture Service projected Brazil’s 2025/26 output will drop -3.1% year-over-year to 63 million bags—a notable decline that explains why coffee prices continue climbing despite abundant global forecasts elsewhere.

Indonesia’s Flooding: A Wildcard That Changes Everything

While Brazil faces drought, Indonesia confronts catastrophic flooding affecting nearly a third of its arabica farms in northern Sumatra. The Association of Indonesian Coffee Exporters warned this could slash the nation’s coffee exports by up to 15% in the 2025-26 season. As the world’s third-largest robusta producer, Indonesia’s struggles have sent robusta prices surging alongside arabica.

This dual-crisis dynamic is crucial to understanding why coffee prices are so high right now—it’s not one region’s problem, but coordinated supply shocks across key producers simultaneously.

Inventory Levels: The Hidden Pressure Point

Tightening global stockpiles are amplifying price moves. ICE arabica inventories plummeted to a 1.75-year low of 398,645 bags on November 20 before recovering modestly to 456,477 bags by Wednesday. Robusta inventories similarly bottomed at an 11.5-month low of 4,012 lots before rebounding slightly.

These depleted reserves mean the market has minimal buffer against further supply disruptions—a key reason why coffee prices respond so sharply to weather news.

Vietnam’s Robusta Boom: Supply Pressure from the Other Side

Yet the supply picture remains contradictory. Vietnam, the world’s largest robusta producer, is ramping up output significantly. November coffee exports jumped +39% year-over-year to 88,000 MT, with January-through-November shipments up +14.8% to 1.398 million MT. Vietnam’s 2025/26 production is projected to climb +6% to 1.76 million bags, potentially marking a 4-year high.

This abundance of Vietnamese robusta is why coffee prices face persistent headwinds from that segment, even as arabica remains tight. The divergence explains the mixed signals traders have seen recently.

Demand Rebounds, But Tariff Damage Lingers

U.S. coffee purchases tell an interesting supply-demand story. Trump-era tariffs had devastated Brazilian coffee imports—American buyers purchased only 983,970 bags between August and October 2024, a -52% collapse compared to the same period last year. Though those tariffs have since been reduced, U.S. coffee inventories remain lean, suggesting pent-up demand may yet emerge.

This inventory tightness in major consuming markets adds another layer to why coffee prices remain elevated despite global forecasts suggesting ample supplies ahead.

The Global Picture: Record Production, but Uneven Distribution

The USDA projects world coffee production in 2025/26 will reach a record 178.848 million bags, representing +2.0% annual growth. However, arabica production is expected to decline -4.7% to 95.515 million bags, while robusta surges +10.9% to 83.333 million bags.

More critical: global ending stocks are projected to fall -5.4% to 20.148 million bags from 21.307 million bags in 2024/25. Despite record production, the world will have less coffee in reserve—the fundamental reason why coffee prices remain sensitive to any new supply disruption.

What This Means for Traders

Understanding why are coffee prices so high requires looking past headlines. It’s not purely about Brazil’s heat wave or Indonesia’s floods individually—it’s the convergence of tightening inventories, production shifts favoring lower-grade robusta over premium arabica, tariff-induced demand suppression in key markets, and weather volatility all compressing into a narrower supply window. Until global stockpiles rebuild or demand absorbs the supply rebalancing, price volatility should persist.