Why Does Brazil's Drought Still Threaten Coffee Production?

Brazil has faced repeated high temperatures, drought and severe fires since 2024, and recent rain in the south is unlikely to ease the drought. Between January and September 2024, 22.38 million hectares of forest and farmland burned, with 10.65 million hectares lost in September alone, 150% above the same month in 2023.

Native vegetation made up 73% of the burned area and farmland 20.5%, with the Cerrado and Amazonas zones hit hardest. The Confederation of Agriculture and Livestock estimated at least 14.7 billion reais in agribusiness losses from June to August fires. Coffee production for the new season stays under pressure as strong exports meet port congestion, keeping international prices high.

Since 2024, Brazil has been repeatedly hit by high temperatures, drought, and severe fires, with vast areas of forest and farmland destroyed, agriculture suffering heavy losses, and coffee-producing regions deeply affected. Although southern Brazil recently received rainfall, the brief precipitation is unlikely to fundamentally alleviate the drought, and the outlook for coffee production in the new season remains grim. Meanwhile, Brazil's coffee exports have performed strongly but are constrained by port logistics congestion, keeping international coffee prices persistently high. This article reviews the multiple impacts of Brazil's fires and drought on the coffee industry and analyzes current export and price trends.

According to Brazilian media reports, since the start of 2024, high-temperature weather has occurred frequently in Brazil, the fire situation has been unusually severe, and multiple industries have been affected. A national forest and farmland fire monitoring report recently released by Brazil's MapBiomas shows that between January and September 2024, a total of 22.38 million hectares of forest and farmland in Brazil were consumed by fire.

In September alone, the burned forest and farmland area reached 10.65 million hectares, almost equivalent to the total affected area in the previous eight months and 150% higher than the 8.98 million hectares in the same period of 2023. Of the burned area, native vegetation accounted for 73%, while farmland accounted for 20.5%.

Statistics show that in the first nine months of this year, Brazil's Cerrado vegetation zone and the Amazonas vegetation zone in Amazonas state were the hardest hit. Among them, a total of 11.3 million hectares of native vegetation were burned in the Amazon vegetation zone; in the Cerrado vegetation zone, 8.4 million hectares of land were damaged by fire. September coincided with the peak of the drought in the region, making fires more frequent and intense, with 4.3 million hectares burned that month alone. Extreme drought caused the flames to spread rapidly, even reaching nearby towns. Earlier, the Brazilian Confederation of Agriculture and Livestock (CNA) estimated that fires from June to August had caused Brazil's agribusiness at least 14.7 billion reais in losses.

At present, these conditions have led to higher electricity prices in Brazil and losses in agricultural production. Some Brazilian experts point out that as climate change intensifies, heat-related illnesses may increase, outdoor work will become more difficult, production efficiency will decline, and more destructive disasters may be triggered, causing casualties and property losses. Worsening drought will also increase the vulnerability of ecosystems, shrink the area of arable land, reduce agricultural output, and lower industrial productivity, with the impact becoming even more obvious in the coming months or even years.

In addition, these losses have also pushed up agricultural production costs, for example because plantations need to be restored; at the same time, the supply of agricultural products on the market has decreased. Since September, Brazil's hydroelectric stations have seen reduced power generation due to insufficient rainfall, and within one month Brazil's electricity prices rose by 5.36%, also driving up the cost of living.

However, there is also good news. After a long period of high temperatures and drought, Brazil will receive rainfall in the coming days. According to forecasts by Brazil's National Institute of Meteorology, most of southern Brazil, including Rio Grande do Sul, Santa Catarina, São Paulo, as well as Goiás and Minas, may receive precipitation.

Although rainfall on such a large scale can effectively alleviate the recent drought and help the current fire situation, the rainy weather will not last long and will gradually weaken afterward. In addition, the rain will lower temperatures somewhat in some states in the south and southeast, but climate change in the central region will be limited, with temperatures in São Paulo state still remaining around 26°C.

Despite the severe high temperatures and drought in Brazil recently, coffee exports have remained strong. According to a report by the Brazilian Exporters Association (Cecafe), Brazil exported 4.464 million bags (60 kg/bag) in September, up 33.3% from the same period last year.

However, exports still face logistical impacts. The report said that because a large number of ships and containers have piled up at ports, coffee has been stranded at ports, and about 2 million bags of coffee could not be shipped this year, increasing losses for exporting companies.

Affected by these factors, local and international coffee prices in Brazil have remained high. This is especially true for Robusta: because Vietnam's new season is still reporting reduced output, the domestic price of Robusta in Brazil stayed above Arabica throughout September. At present, Brazil's Arabica spot price is about 1,472.73 reais/bag, while the Robusta coffee spot price is 1,497.46 reais/bag, 24.73 reais higher than the Arabica spot price.

At present, for Brazil's coffee industry, drought and high temperatures continue to affect coffee production in the new season. Although there has been rainfall, the brief precipitation has had little effect on alleviating the drought, and high temperatures are still affecting coffee-producing regions, so coffee production in the new season will not improve much. Although earlier, due to U.S. inflation, the U.S. dollar index rose sharply, dragging down commodity prices and causing Brazilian coffee prices to fall for a time, prices are currently still at high levels because of increased costs.

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The above content is compiled by CoffeeHunters, a coffee news website.