Why Coffee Futures Dropped 23% into Bear Market

Coffee traders watched nervously as the world’s top arabica producer, Brazil, suffered through its worst drought in 50 years. But even as rains finally arrived last month, international coffee futures didn’t recover—they kept falling. In fact, prices have now dropped sharply from their recent highs.

Since reaching a two-year high in April, international arabica coffee futures have plummeted 23%, officially entering bear market territory. As of the latest data, July arabica futures on ICE Futures U.S. closed at $1.7115 per pound, down from the April 24 peak of $2.148 per pound—a 23% decline.

What Is a Bear Market in Coffee Futures?

A bear market in commodities like coffee is typically defined as a price drop of 20% or more from a recent high. That threshold was crossed in June, when arabica futures dipped well below the April peak. The fall has shaken both producers and roasters who had braced for tighter supplies due to drought.

Why Did Coffee Prices Drop Even as Brazil’s Drought Eased?

Despite welcome rainfall in Brazil last month, which alleviated some stress on coffee trees, several factors combined to push futures lower. One major reason is rising coffee inventory levels in the United States, which have offset concerns over reduced Brazilian output. Additionally, updated production forecasts suggest the damage may not be as severe as initially feared.

Brazil’s Updated Coffee Production Outlook

Brazil’s Agriculture Minister Neri Geller stated that last month’s rain helped mitigate the impact of the worst drought in half a century, reducing the expected crop losses. The Brazilian National Supply Company (Conab) lowered its 2024 coffee production estimate to 44.6 million 60kg bags, down from its January projection of 46.5–50.2 million bags. However, Minister Geller believes the final harvest could exceed 44.6 million bags, as farmers—buoyed by higher prices—have taken better care of their trees, helping ensure a buffer for the next season.

Meanwhile, private sector forecasts are even more optimistic. Mercon Group reports that the hardest-hit growing regions are recovering, and predicts Brazil could produce 50.5 million bags this year—higher than the U.S. government’s May estimate of 49.5 million bags.

How the Drought Initially Boosted Prices

Earlier in the year, extreme heat and scarce rainfall drove global coffee prices up by 55%. The prospect of a reduced Brazilian harvest raised fears of tight global supply, pushing both futures and spot prices higher. Export volumes also fell as a result. Brazilian arabica exports to major U.S. buyers—including Starbucks and Nestlé—are now projected to reach 32.2 million bags, a notable decline from last year’s 38.3 million bags.

Frequently Asked Questions

What caused the 23% drop in coffee futures?

The 23% drop in international arabica coffee futures—from $2.148 per pound on April 24 to $1.7115 per pound recently—is due to rising U.S. inventory levels, better-than-expected recovery from Brazil’s drought, and updated production forecasts suggesting less damage to the coffee crop than originally feared.

Has Brazil officially lowered its coffee production estimate for 2024?

Yes. Brazil’s government agency Conab reduced its 2024 coffee production estimate to 44.6 million 60kg bags, down from its earlier January forecast of 46.5–50.2 million bags, citing the impact of drought. However, officials and analysts believe the final harvest could be higher.

Why are coffee prices falling if Brazil had a drought?

Although Brazil experienced severe drought earlier in the year, recent rainfall has mitigated some damage. Additionally, higher farmer care due to elevated prices, improving crop conditions in drought-hit areas, and increased U.S. coffee inventories have all contributed to falling prices despite initial drought concerns.

How much coffee is Brazil now expected to export to the U.S.?

Brazilian arabica coffee exports to major U.S. buyers like Starbucks and Nestlé are now projected at 32.2 million 60kg bags for this year, down from 38.3 million bags in the previous year.

What defines a bear market in coffee futures?

A bear market in coffee futures is generally recognized when prices fall 20% or more from a recent peak. This threshold was crossed when July arabica futures dropped from their April 24 high of $2.148 per pound to around $1.7115 per pound—an over 23% decline.

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