Entering the second half of 2026, the global coffee market is facing the test of rising climate risks. (Graphic, Bloomberg)
El Niño phenomenon causes coffee futures to skyrocket
[Financial Channel/Comprehensive Report] In July this year, global coffee market prices fluctuated sharply, and Arabica coffee futures fluctuated repeatedly between rising and falling. The price of Arabica coffee futures soared 18% intraday on July 7, soaring to US$3.57 per pound, setting the largest single-day intraday increase since July 2000, rewriting a 26-year record, and then reversed and fell sharply the next day.
Foreign media pointed out that as the market's concerns about the potential impact of the El Niño phenomenon have increased, long and short funds have continued to compete, and fund buying and short positions have formed a clear tug of war.
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Recent rainfall in Brazil's major coffee-producing areas has continued to be higher than the historical average, which has slowed down the progress of coffee harvesting. The market has also begun to worry that excessive rainfall may affect the quality of coffee beans.
In addition to Brazilian weather, the market has recently begun to pay close attention to the development of a new round of El Niño in the Pacific region. Climatologists warn that this time El Niño may reach an intensity rarely seen in the past. If the effects of strong weather and global warming occur at the same time, it may further increase global temperatures and increase the risk of extreme weather events.
Analyst Thobias Silva said that large-scale El Niño events in history usually have a significant impact on global agricultural production and may increase commodity market volatility and the risk premium required by investors. At present, the El Niño phenomenon has not had a direct impact on the ongoing coffee harvest in Brazil, but the market has increased its vigilance and will closely observe weather changes in Brazil and other major coffee-producing areas in the next few months.
Arabica coffee futures prices in July this year recorded their largest single-day intraday gain since July 2000. (Graphic, Bloomberg)
ICE Arabica coffee stocks at low levels
Entering the second half of 2026, the global coffee market is facing the test of rising climate risks. As the El Niño phenomenon gradually intensifies, the market's doubts about possible high temperatures, droughts, abnormal rainfall, etc. in major producing areas have increased, and coffee futures prices have also fluctuated violently.
Reuters reported in September that traders and analysts familiar with the matter said traders were planning to ship large quantities of Arabica coffee from Brazil, the world's largest coffee producer, to Intercontinental Exchange (ICE) warehouses. As ICE inventories have fallen to 26-year lows and pushed up coffee prices, the shipment could put pressure on prices if it enters exchange inventories.
The Arabica coffee futures contract, the global coffee pricing benchmark, once exceeded $3.5 per pound in July this year, hitting a six-month high. Despite market expectations of a massive supply glut in the 2026/27 season, coffee prices remain at a high of nearly $3 per pound.
Industry analysts said that the main reason why coffee prices continue to be high is that ICE Arabica coffee stocks are at a low level. About 70% of ICE inventory is currently stored in Antwerp, Belgium.
Affected by problems related to "harvest delays" and "extreme weather", ICE certified coffee stocks have now dropped to less than 220,000 bags. By comparison, from the mid-2000s to early 2022, stocks typically remained between 1 million and 5 million bags.
From the mid-2000s to early 2022, stocks typically remained between 1 million and 5 million bags. (Diagram, Reuters)
Climate raises coffee supply risks
The latest information released by the World Meteorological Organization (WMO) in September pointed out that the El Niño phenomenon has been established and is expected to further intensify in the coming months, with a close to 100% chance of continuing until February 2027. WMO also warned that the strong El Niño may significantly change global rainfall and temperature patterns, increasing the risk of extreme weather such as drought, extreme heat, and heavy rainfall.
For coffee, which is highly dependent on specific climate conditions for growth, the forecast also means new supply uncertainties are developing. However, this concern over rising coffee prices is not simply caused by the El Niño phenomenon. Since 2026, the Brazilian harvest progress, abnormal rainfall, low global inventories, and market expectations for future supply have intertwined with each other, making coffee prices highly volatile.
The latest data from the International Coffee Organization shows that the average coffee comprehensive indicator price in August 2026 was 287.29 cents per pound, almost the same as 287.26 cents in July. However, during August, the market was supported by doubts about the Holy Ninth and tight short-term Arabica supply, and then fell back due to favorable rainfall in Brazil and increased expectations for supply increase.
This shows that what the current coffee market is really facing is not a one-way rise, but a new situation of "increased supply risks and violent price fluctuations."
The increasing El Niño phenomenon has once again put a variety of agricultural products under weather pressure. (Diagram, Reuters)
Climate also hits Peru's anchovy fishery
In addition to coffee beans, according to analysis by Rabobank, the increasing El Niño phenomenon has once again put a variety of agricultural products under weather pressure. Among them, cocoa, palm oil, sugar, and Australian grains are markets that are highly affected by adverse weather.
At present, the Holy Child phenomenon has been formed, and there is an 81% chance of further strengthening it to a "very strong" Holy Child event. Rabobank researchers said that although the impact of each El Niño event is different, its impact on the agricultural market is expected to be more obvious between the end of 2026 and 2027.
For food and beverage companies, the most direct impact may be reflected in the supply and price of commodities, but the timing and extent of the impact will vary widely in different markets.
The most obvious supply shock has already appeared in the seafood market. Peru's anchovy fishery is the world's largest single-species fishery and an important source of global fishmeal and fish oil, but it has been severely impacted by rising sea temperatures.
For the 2026 fishing season from May to July, the quota is 36% lower than the previous year, and the final catch is expected to be only about 25% of the quota. This has caused the global supply of fishmeal and fish oil to tighten. Rabobank stated that the price of fishmeal has more than doubled compared with the same period last year, and the price of fish oil has increased more than three times compared with July 2025. Rising feed costs are also affecting the aquaculture industry, including salmon and shrimp farming.
Rabobank pointed out that the crops of most concern are not necessarily the largest food commodities in terms of output, but those commodities with highly concentrated supply chains and buyers lacking easy alternative sources. Cocoa is one of them, as global supplies are concentrated in West Africa, Ecuador and Southeast Asia, all of which may face climate stress from El Niño in different ways.
The same is true for palm oil, because Indonesia and Malaysia together account for more than 80% of global palm oil production, and the impact of dry weather on production may be delayed by about 6 to 12 months. Robusta, the second largest coffee bean variety in terms of global production after Arabica, is affected by the supply situation in Vietnam, Indonesia and India; sugar faces risks from India, Thailand and Australia.
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