Key Takeaways
- Coffee futures closed mixed, with arabica declining and robusta seeing a slight increase.
- Weather forecasts for Brazil and Vietnam influenced recent price movements, impacting supply expectations.
- Shrinking ICE coffee inventories and US import tariffs on Brazilian coffee are supporting prices.
- Potential removal of US tariffs on Brazilian goods could put downward pressure on coffee prices.
- Concerns over a La Niña event increasing dry weather in Brazil continue to underpin market sentiment.
Market Performance and Influencing Factors
December arabica coffee futures (KCZ25) settled lower on Friday, experiencing a 1.74% decrease, while November ICE robusta coffee futures (RMX25) closed with a modest gain of 0.37%. This mixed performance followed sharp declines seen in both coffee varieties on Thursday, which saw arabica drop 2.54% and robusta fall 3.90%. The recent price movements represent a pullback from the 8.3-month high for arabica and a 5-week high for robusta achieved earlier in the week.
Arabica coffee prices faced downward pressure on Thursday due to a forecast from Climatempo predicting weekend showers in Brazil’s key coffee-growing regions. Concurrently, robusta coffee experienced a slump as Vietnam’s weather office reduced the likelihood of heavy rainfall from Tropical Storm Fengshen in the Central Highlands, Vietnam’s primary coffee-producing area. This forecast lessened concerns about potential crop damage.
Recent Developments and Forecasts
Despite a bearish forecast from the Vietnam Coffee and Cocoa Association (Vicofa) projecting a 10% increase in Vietnam’s 2025/26 coffee output under favorable weather conditions, robusta coffee managed to close higher on Friday. This resilience highlights the complex interplay of global supply and demand factors influencing the market.
The coffee market continues to be supported by anxieties regarding the impact of excessive dry conditions in Brazil during the critical flowering period for coffee trees, which could jeopardize the 2026/27 coffee crop. Recent analyses, including those from Bloomberg Brazil Weather, indicate that coffee-producing regions in Brazil have been experiencing significant drought, with Minas Gerais recording approximately 70% of its average rainfall over the past month.
Inventory Levels and Trade Policies
Shrinking ICE coffee inventories are also providing a floor for coffee prices. The imposition of 50% tariffs on US imports from Brazil has led to a substantial drawdown in ICE coffee stocks. Specifically, ICE-monitored arabica inventories on Friday reached a 1.5-year low of 447,773 bags, while ICE robusta coffee inventories hit a 3-month low of 6,130 lots.
American buyers are reportedly abstaining from new contracts for Brazilian coffee purchases due to the high tariffs, consequently tightening US supplies. This is a significant factor, as approximately one-third of the unroasted coffee imported into the United States originates from Brazil.
Geopolitical and Weather Influences
There are emerging hopes that the recently imposed 50% US tariff on imported Brazilian goods may be rescinded, a development that could lead to bearish pressure on coffee prices. Last Thursday’s reports indicated very positive talks between US Trade Representative Greer and Brazilian Minister of Foreign Affairs Vieira regarding trade, with both sides expressing intentions to schedule a meeting between President Trump and President Lula. Such a diplomatic breakthrough could impact trade dynamics and market sentiment.
Further contributing to coffee price support is the National Oceanic and Atmospheric Administration’s (NOAA) September 16 update, which increased the probability of a La Niña weather system in the southern hemisphere to 71% for the October to December period. A La Niña event could bring excessively dry weather to Brazil, potentially harming the 2026/27 coffee crop. Brazil’s significance as the world’s largest producer of arabica coffee underscores the global market’s sensitivity to its weather patterns.
Regional Production and Export Data
Despite broader concerns about dry weather, recent rainfall data from Somar Meteorologia indicated that Minas Gerais, Brazil’s largest arabica coffee-growing region, received 44.7 mm of rain in the week ending October 18, which is 136% of the historical average. This localized rainfall may offer some temporary relief to the crop.
Robusta coffee prices are facing pressure from increased supply from Vietnam. Statistics from the Vietnam National Statistics Office reported that from January to September 2025, Vietnam’s coffee exports rose by 10.9% year-on-year to 1.230 million metric tons. Furthermore, Vietnam’s 2025/26 coffee production is projected to increase by 6% year-on-year to 1.76 million metric tons, or 29.4 million bags, marking a four-year high. As the world’s largest producer of robusta coffee, these export figures from Vietnam carry significant weight in the global market.
Larger global coffee exports generally exert bearish pressure on prices. The International Coffee Organization (ICO) reported on October 6 that global coffee exports for the current marketing year (October-August) increased by 0.2% year-on-year to 127.92 million bags, suggesting ample supply in the global market.
Conversely, coffee prices have found support from Conab, Brazil’s crop forecasting agency, which revised its Brazil 2025 arabica coffee crop estimate downward by 4.9% to 35.2 million bags on September 4, from a May forecast of 37.0 million bags. Conab also reduced its total Brazil 2025 coffee production estimate by 0.9% to 55.2 million bags.
The USDA’s Foreign Agriculture Service (FAS) projected on June 25 that world coffee production in 2025/26 would rise by 2.5% year-on-year to a record 178.68 million bags. This figure includes a projected 1.7% decrease in arabica production to 97.022 million bags and a significant 7.9% increase in robusta production to 81.658 million bags. FAS forecasts Brazil’s 2025/26 coffee production to increase by 0.5% year-on-year to 65 million bags, and Vietnam’s output to reach a four-year high of 31 million bags, a 6.9% year-on-year rise. Projections indicate that 2025/26 ending stocks are expected to climb by 4.9% to 22.819 million bags, up from 21.752 million bags in 2024/25.
Expert Summary
The coffee market is navigating a complex landscape influenced by conflicting weather reports, evolving trade policies, and significant inventory shifts. While robusta has shown some resilience, arabica prices remain sensitive to potential supply disruptions in key producing regions like Brazil.
Key factors to monitor include the progression of the La Niña phenomenon, the outcome of US-Brazil trade discussions, and ongoing adjustments in global coffee inventories and export volumes from major producers such as Vietnam and Brazil.