How Does Coffee Production in Brazil Shape the Luckin Deal?
At the G20 summit in Brazil, Luckin Coffee signed a memorandum with the Brazilian Export and Investment Promotion Agency to buy a cumulative 240,000 tons of Brazilian coffee beans between 2025 and 2029, worth 10 billion RMB. It is the company's largest bean procurement plan to date, adding 120,000 tons to an earlier two-year agreement.
Brazil's coffee production faces weather uncertainty: drought and fires have damaged the new crop season and institutions have lowered forecasts, while coffee futures prices keep climbing. Producers have sold 70% of this year's crop, above last year's 64% and the five-year average of 67%, and Brazil set an October export record of 4.926 million bags.
During the G20 summit in Brazil, Luckin Coffee signed a memorandum of cooperation with the Brazilian Export and Investment Promotion Agency, planning to purchase a cumulative 240,000 tons of Brazilian coffee beans between 2025 and 2029, with a total value of 10 billion RMB, setting Luckin's largest procurement record. Meanwhile, Brazil's coffee industry is facing production uncertainty brought about by extreme weather: although the current sales pace has accelerated and exports have hit a historic high, drought and fires have already damaged the new crop season, multiple institutions have lowered production forecasts, and international coffee futures prices have continued to climb as a result. This article will review the key points of the agreement, Brazil's sales dynamics, and the impact of weather on the supply-demand landscape.
During the G20 summit held in Brazil, Luckin Coffee and the Brazilian Export and Investment Promotion Agency (ApexBrasil) jointly signed a "Memorandum of Cooperation" in Brasilia, the capital of Brazil. Under this memorandum, Luckin, building on the agreement already reached in June to purchase 120,000 tons of Brazilian coffee beans over two years, further added another 120,000 tons to its procurement volume.
This means that over the five years from 2025 to 2029, Luckin Coffee will purchase a cumulative 240,000 tons of coffee beans from Brazil, with a total value reaching 10 billion RMB, making it Luckin's largest coffee bean procurement plan to date.
On the other hand, a report released by consulting firm Safras pointed out that with international coffee prices currently at high levels, Brazilian coffee producers are seizing this opportunity to accelerate their sales pace. Data shows that Brazil has already sold 70% of this year's coffee production, a proportion exceeding last year's 64% for the same period and the average sales pace of 67% over the past five years.
Earlier, the Brazilian Coffee Exporters Council (Cecafe) also reported that the average selling price of Brazilian coffee in October was higher than usual, at approximately US$282.8 per bag. Despite such high prices, Brazil still set a historic record for coffee exports in October, with export volume reaching 4.926 million bags (60 kg per bag).
According to local coffee growers, recent needs for funds to purchase fertilizer and pay employee salaries have stimulated the sales pace. Currently, the sales completion rate for Arabica coffee is 67%, while for Robusta coffee it is 76%.
In addition, the Safras report also mentioned that Brazil has pre-sold approximately 11% of its 2025/26 coffee production, with the pre-sale progress for Arabica coffee at 16%, noticeably lower than last year's 25% for the same period. This is mainly because recent rises in international futures prices, a stronger US dollar, the depreciation of the Brazilian real, and concerns about future Brazilian coffee production declines have prompted green coffee traders to adopt a more cautious attitude and slow the pace of future sales.
Brazil has continued to suffer from severe weather this year, resulting in highly unstable coffee production for the next crop season. Brazil previously experienced its worst drought in recent years and was threatened by fires triggered by the drought, causing reduced coffee production in the new season and also damaging the planting conditions and production potential of the 2025/26 new crop season.
Although Brazil has recently begun to see rainfall again, and the rain has replenished moisture to the parched soil and eased pressure on the coffee trees, it is still not enough to compensate for the damage caused to the coffee trees by drought and fires. Moreover, the rainfall is gradually intensifying, and Brazil's National Institute of Meteorology recently issued an orange alert for heavy rainfall, with parts of 12 states in central Brazil to be affected, and rainfall in some areas possibly reaching 100 mm within 24 hours, accompanied by strong winds of up to 100 kilometers per hour.
This severe weather is unfavorable for the growth of Brazilian coffee trees, and multiple institutions have already lowered their forecasts for Brazil's new crop coffee production, including the United States Department of Agriculture (USDA). According to its latest data, Brazil's 2024/25 coffee production is approximately 66.4 million bags, lower than the previous estimate of 69.9 million bags. In addition, Brazil's inventory at the end of 2024/25 is estimated at 1.2 million bags, down 26% from the previous year.
Although Luckin Coffee has signed a coffee bean procurement memorandum with Brazil worth over 10 billion, providing considerable support to Brazil's coffee industry, Brazil is still affected by severe weather, and the production outlook for the future crop season remains unclear. This uncertainty is also continuing to push up international coffee futures prices.
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The above content is compiled by CoffeeHunters, a coffee news website.
