Prospects of a weaker 2027-28 coffee crop, thin inventories and a strengthening El Nino, which could increase downside risks for producers in Asia, are likely to support prices in the coming quarters.BMI, a unit of Fitch Solutions, has raised its forecast for average coffee prices in 2026 to 307 cents a pound from 293 cents in its latest outlook.“Though the Brazilian harvest outlook looks robust, we believe attention will increasingly shift towards the 2027-28 crop, for which prospects appear weaker, providing growing support to prices over the coming quarter,” BMI said.“We expect the anticipated strengthening of the ongoing El Nino event to elevate downside risks to production, particularly across weather-sensitive producers in Asia. Against the backdrop of historically thin inventories, these supply-side risks will continue to underpin coffee prices through the remainder of 2026 and into 2027.”Prices reboundCoffee prices have reversed the weakness seen through much of H1 2026, rising from 240.9 cents a pound on June 9 to 332 cents on August 18 and averaging 316 cents a pound in the quarter so far, BMI said.“While prices have increased more than we previously anticipated, the move remains broadly consistent with the risk we have highlighted throughout the year – historically thin inventories leave the market vulnerable to sharp price increases when supply concerns emerge,” it said.BMI expects market attention to shift from the strong 2026-27 Brazilian harvest towards the 2027-28 crop as Brazil’s arabica sector enters the off-year of its biennial production cycle in late Q3. Softer output expectations and elevated weather risks linked to El Nino are likely to support prices, it said.“A bullish trend is possible, but right now there is a dip in the market and the 2026-27 crop from Brazil is a big one. Once the crop hits the market, we are likely to see a drop in prices for the rest of 2026 and early 2027. Depending on how El Nino plays out and its impact on Brazil and Vietnam, we could see another uptrend, but it is still too early to call,” said Praveen Kolimarla of Agrani Coffee and Commodities.Brazil crop to expandGlobal coffee production is forecast to rise 6 per cent to 188.9 million bags in 2026-27, BMI said. Brazilian output is expected to increase 14.1 per cent year-on-year to 71.9 million bags, despite the 2026-27 arabica harvest progressing more slowly than expected.Vietnam’s 2026-27 production is forecast to rise 0.6 per cent to 31.9 million bags. BMI maintained a cautious outlook for other producers, including Ethiopia, Honduras and Nicaragua, citing fertilizer affordability pressures following the spike in prices after the US-Iran conflict.Brazilian output is forecast to fall 5.1 per cent year-on-year to 68 million bags in 2027-28 as the arabica crop enters its off-year. This is expected to moderate the favourable supply outlook created by the strong 2026-27 harvest and support prices, BMI said.El Nino raises risksBMI expects the strengthening El Nino to keep weather risks elevated, tilting the balance of risks to the upside. The robusta market faces the greatest risk, with more than half of global output concentrated in Vietnam, Indonesia and India, where El Nino is historically associated with below-average rainfall.Though below-average rainfall in H1 2026 poses limited risks to the 2026-27 crop, given supportive rainfall in late 2025, risks to the 2027-28 crop are greater.Concerns could intensify if conditions deteriorate rapidly, leading to a sharper drawdown in water reserves ahead of fruit-setting and bean development in Q2 2027, BMI said. Producers could also reduce fertiliser and other input applications pre-emptively, increasing yield risks.Brazil, Colombia and Ethiopia also face rainfall risks, though their exposure is comparatively limited because of their location farther from regions typically affected by El Nino, BMI said.Overall, BMI expects the global surplus to narrow from 14.4 million bags in 2026-27 to 9.2 million bags in 2027-28, providing further support to prices.Published on September 3, 2026