Key Takeaways
- Coffee futures for December Arabica (KCZ25) and January Robusta (RMF26) saw modest gains on Thursday.
- Shrinking ICE coffee inventories, particularly for Arabica, are providing upward support for prices.
- Tariffs on Brazilian coffee imports into the US are significantly impacting inventory levels and purchasing decisions.
- Weather forecasts in Brazil and production outlooks in Vietnam are key factors influencing coffee market sentiment.
- Global coffee production estimates and export data continue to play a role in price dynamics.
Coffee Market Sees Gains Amidst Inventory Concerns
December Arabica coffee futures (KCZ25) closed higher on Thursday, gaining +1.30 (+0.33%), while January ICE Robusta coffee futures (RMF26) also experienced an increase, closing up +31 (+0.67%). Both coffee contracts managed to rebound from earlier losses, demonstrating resilience in the market.
💡 Supportive for coffee prices is the ongoing drawdown in ICE coffee inventories. This reduction is partly attributed to the imposition of 50% tariffs on imports from Brazil into the United States. Consequently, ICE-monitored Arabica inventories have fallen to a 1.5-year low of 446,475 bags as of Wednesday. Similarly, ICE Robusta coffee inventories have reached a 3.25-month low, standing at 6,111 lots.
📌 American buyers are increasingly avoiding new purchases of Brazilian coffee due to the substantial 50% import tariff. This shift in purchasing behavior is leading to tighter supplies within the US, especially considering that roughly one-third of the nation’s unroasted coffee originates from Brazil.
Factors Influencing Price Volatility
Earlier in the week, coffee prices experienced a dip, reaching two-week lows on Tuesday. This decline was influenced by forecasts of rain in key Brazilian coffee-growing regions, which offered some relief from the recent dry spell. Somar Meteorologia reported that Brazil’s primary Arabica coffee-producing state, Minas Gerais, received minimal rainfall (0.3 mm) in the week ending October 24, a mere 1% of the historical average.
⚡ Speculation regarding the potential removal of the 50% US tariff on Brazilian coffee is also creating downward pressure on Arabica prices. Reports emerged on Monday of a surprisingly good meeting between Brazil’s President Luiz Inacio Lula da Silva and President Trump. This interaction has fueled expectations of a potential resolution to US-Brazil trade issues within days.
Brazilian Weather and Crop Concerns
Last Thursday, Arabica coffee prices saw a significant rally, hitting an 8.5-month high in nearest-futures. This surge was driven by concerns over excessively dry conditions in Brazil during the critical flowering period for coffee trees, which could jeopardize the 2026/27 coffee crop. According to Bloomberg Brazil Weather Analysis, significant drought has affected Brazilian coffee-producing areas, with Minas Gerais recording only about 70% of its average rainfall over the past month.
📊 Further bolstering coffee prices, the National Oceanic and Atmospheric Administration (NOAA) increased the likelihood of a La Niña weather system in the southern hemisphere from October to December to 71% on September 16. Such conditions could lead to excessive dryness in Brazil, potentially damaging the 2026/27 coffee crop. Brazil is recognized as the world’s largest producer of Arabica coffee.
Global Supply Dynamics Impacting Robusta
Robusta coffee prices are facing pressure from increasing supplies originating from Vietnam. Data from the Vietnam National Statistics Office revealed that Vietnam’s coffee exports from January to September 2025 rose by 10.9% year-over-year to 1.230 million metric tons. Furthermore, Vietnam’s coffee production for the 2025/26 season is projected to increase by 6% year-over-year to 1.76 million metric tons (29.4 million bags), marking a 4-year high.
Additionally, the Vietnam Coffee and Cocoa Association (Vicofa) indicated last Friday that Vietnam’s coffee output in 2025/26 could see a 10% increase compared to the previous crop year, assuming favorable weather conditions. Vietnam holds the position of the world’s largest producer of Robusta coffee.
💡 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-over-year to 127.92 million bags. This indicates adequate export volumes and overall supply levels, which can exert bearish pressure on prices.
Production Forecasts and Estimates
Coffee prices found support after Conab, Brazil’s crop forecasting agency, revised its Brazil 2025 Arabica coffee crop estimate downwards by 4.9% to 35.2 million bags on September 4, from an earlier forecast of 37.0 million bags in May. Conab also reduced its total Brazil 2025 coffee production estimate by 0.9% to 55.2 million bags, down from 55.7 million bags estimated in May.
The USDA’s Foreign Agriculture Service (FAS) projected on June 25 that world coffee production in 2025/26 is expected to increase by 2.5% year-over-year to a record 178.68 million bags. This includes a projected 1.7% decrease in Arabica production to 97.022 million bags and a notable 7.9% rise in Robusta production to 81.658 million bags. The FAS forecasts Brazil’s 2025/26 coffee production to rise by 0.5% year-over-year to 65 million bags, and Vietnam’s output is expected to increase by 6.9% year-over-year to a 4-year high of 31 million bags. The FAS anticipates that 2025/26 ending stocks will climb by 4.9% to 22.819 million bags, up from 21.752 million bags in 2024/25.
Expert Summary
The coffee market is currently navigating a complex interplay of factors, including tightening inventories, geopolitical trade policies like US tariffs on Brazilian coffee, and weather patterns impacting key producing regions like Brazil and Vietnam. While recent data points to increased global production and robust supply, specific inventory levels and regional weather events are providing support for coffee prices. Traders and analysts are closely monitoring these developments to anticipate future market movements.