Brazil drought hits coffee farms and threatens to push prices even higher

Coffee growers in Brazil’s Sao Paulo state are assessing the damage caused by a wildfire that devasted their crops in recent days, as the world’s largest coffee producing country faces its worst drought in more than seven decades.

In the municipality of Caconde, one of the state's largest coffee producers, farmers and local residents joined forces to put out the fire that had reached around 50 farms, consuming an estimated 600 hectares, according to growers.

Coffee producer Helio Moreira de Araújo said he lost between eight and ten thousand coffee trees.

“We were expecting a harvesting of 500-600 bags but we're going to harvest more or less half of it," he said. "The other half burned down.”

Brazil's ongoing drought is already affecting the start of the 2025/2026 season, according to a report released Thursday by the Center for Advanced Studies on Applied Economics at the University of Sao Paulo’s agribusiness school.

At the same time, Vietnam, the world’s second-biggest coffee producer, is experiencing heat and drought, affecting its crops. Potential supply shortages in both countries have started driving up global coffee prices, according to the report.

The market is closely monitoring how Brazilian coffee plants develop in the adverse climate conditions, which can cause flowers to stop blooming, fail to turn into beans or produce fewer or lower-quality beans.

“It could result in a smaller coffee harvest. Since the market tends to anticipate these movements, we’ve already seen the price of Arabica coffee in New York and Robusta in Europe trading at higher levels,” said Felippe Serigati, who coordinates the master’s program in agribusiness at the Getulio Vargas Foundation.

Coffee prices haven’t reached the record highs the world saw in the late 1970s, after a severe frost wiped out 70% of Brazil’s coffee plants. But they have been soaring in recent years.

In August, the International Coffee Organization’s Composite Indicator Price – which combines the price of several types of green coffee beans – averaged $2.38 per pound, up nearly 55% from the same month a year ago.

Despite challenging weather conditions, the International Coffee Organization expects coffee production to outpace demand this year, which should help temper price increases.