(Bloomberg) -- Volcafe Ltd., one of the world’s biggest coffee traders, cut its outlook for Brazil’s arabica production after a crop tour revealed the severity of an extended drought in the world’s top grower.

Brazil is seen producing just 34.4 million bags of the premium arabica bean in the coming season, down by about 11 million bags from a September estimate, according to a presentation seen by Bloomberg News. That puts global coffee production on track to fall short of demand by 8.5 million bags in the 2025-26 season, marking an unprecedented fifth year of deficits, it said.

Brazil “had the potential of moving the global supply and demand equilibrium back into a much-needed surplus,” Volcafe said. “However, the results of our crop tour indicate significantly high levels of blossom failure.”

The estimates are based on a crop tour of 1,850 sample farms, which showed “the stark impact” of weather on coffee trees, according to the report. A prolonged drought from April to September depleted soil moisture, caused leaves to fall off trees and prevented blossoming. Trees that did grow blossoms failed to flower and develop further.

The outlook for 2025-26 is worse than for the current season, in which Brazilian arabica production is expected to be 43.3 million bags, resulting in a global deficit of 5.5 million bags. A bag weighs 60 kilograms (132 pounds).

“The loss of Brazil’s 2025-26 arabica crop is a critical flag to the outlook for the market structure,” Volcafe said. Certified stockpiles held by the futures exchange are now unlikely to rise above a target threshold that would have helped the market move into a structure where current prices are lower than future prices.

Arabica coffee futures traded in New York have surged to the highest since 1977 on concerns over the drought’s impact in Brazil.

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