How the Brazilian Real’s Fall Dropped Coffee Prices

Brazil’s falling currency isn’t just economic news—it’s changing your cup of coffee. When the Brazilian Real weakens, the world’s largest coffee producer ships more beans overseas at cheaper dollar prices. That flood of supply is now pulling global coffee prices down, affecting everyone from roasters to café-goers. Here’s how currency shifts and export volumes reshape what you pay for coffee.

In the first half of 2023, Brazil exported 20% more coffee than the same period last year—13.385 million bags, or 803,000 metric tons—fueled by a 9.4% drop in the Real’s value during Q2, the steepest decline among 24 major emerging market currencies. That made Brazilian coffee more profitable to sell abroad, draining even the biggest inventories since 2007.

Brazil’s Export Surge and Global Oversupply

Brazil’s Trade Ministry reported the export jump as the Real hit a four-year low. The weaker currency effectively raises the dollar value of coffee sold overseas, encouraging producers to move stock. Analysts polled by Bloomberg expect this supply surge, amid four straight years of global oversupply, to push coffee prices down 11% by year-end—to $1.08 per pound.

Market Ripple Effects: From Futures to Roasters

The New York ICE futures price for Arabica coffee has fallen 61% since hitting a 14-year high in May 2011. Year-to-date, futures are down 16%, trading at $1.214 per pound—outpacing the 2.7% drop in the S&P GSCI commodity index and contrasting with a 4.4% rise in the U.S. dollar index and a 2.5% decline in U.S. Treasuries. Coffee price drops have already prompted actions: JM Smucker cut the price of its Folgers brand in February, and Starbucks saw wider profit margins in Q2.

Regional Export Shifts: Colombia, Peru, and Beyond

Brazil isn’t the only player adjusting. Colombia, the second-largest Arabica producer, saw its exports rise 32% in the first five months of 2023, helped by a 7.1% depreciation of the Colombian peso. Meanwhile, Peru, South America’s third-largest grower, saw sales drop 31% as buyers turned to cheaper Brazilian beans.

What This Means for Coffee Prices

The combination of Brazil’s record exports, currency-driven price drops, and global oversupply is reshaping the market. With more beans available and costs lower for major buyers like Starbucks and Kraft Foods, retail prices and roaster margins are feeling the impact. Analysts expect Starbucks’ Q3 profits to rise 21% for the fiscal year ending June 30, reflecting broader industry trends, while its stock has climbed 25% year-to-date.

Frequently Asked Questions

Why did Brazil export 20% more coffee in early 2023?

Brazil’s coffee exports rose 20% in the first half of 2023 to 13.385 million bags (803,000 metric tons) due to a 9.4% Q2 depreciation of the Brazilian Real, the largest drop among 24 major emerging market currencies. The weaker currency made exports more profitable, encouraging producers to sell even their largest inventories since 2007.

How much are global coffee prices expected to drop by the end of 2023?

Analysts surveyed by Bloomberg predict global coffee prices will fall 11% by the end of 2023 to $1.08 per pound, driven by four consecutive years of oversupply and increased Brazilian exports.

Has the Brazilian Real’s fall affected other coffee-growing countries?

Yes. Colombia’s coffee exports rose 32% in early 2023 due to a 7.1% peso depreciation, while Peru’s sales dropped 31% as buyers shifted to cheaper Brazilian beans.

How have coffee price drops impacted major brands?

JM Smucker cut Folgers’ price in February, and Starbucks reported wider Q2 profit margins. Analysts also expect Starbucks’ Q3 profits to grow 21% for the fiscal year ending June 30, reflecting the broader market trend.

What’s the current price of Arabica coffee futures?

Arabica coffee futures have fallen 16% year-to-date to $1.214 per pound, a 61% drop from their 14-year high in May 2011.

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