Quick Summary
- Coffee futures experienced a downturn, with December arabica and January robusta both closing lower.
- Potential U.S. tariff cuts on non-U.S.-grown crops, including coffee, contributed to the price decline.
- Strong production forecasts from Brazil and increased supplies from Vietnam are also exerting downward pressure on prices.
- Shrinking coffee inventories on exchanges and concerns about global supply tightness have provided some support.
- The potential for a La Niña weather system in Brazil could impact future crop yields.
Coffee Futures See Decline Amid Shifting Market Dynamics
December arabica coffee futures (KCZ25) closed down -1.90 (-0.47%), while January ICE robusta coffee futures (RMF26) closed down -120 (-2.76%) on Friday. This marked a third consecutive day of losses for coffee prices, reaching two-week lows.
Factors Influencing Coffee Prices
Potential U.S. Tariff Adjustments: Market sentiment was influenced by statements from Treasury Secretary Bessent, who indicated substantial announcements over the next couple of days regarding crops not domestically grown, such as coffee. This suggested a potential reduction in U.S. tariffs, which could impact global coffee trade flows.
Brazilian Crop Projections: StoneX released its initial forecast for the 2026/27 season, projecting a significant coffee harvest in Brazil. The forecast estimates a total production of 70.7 million bags, including 47.2 million bags of arabica, representing a substantial year-over-year increase of 29%. This optimistic outlook for Brazilian supply contributed to bearish sentiment in the market.
Favorable Weather in Brazil: Recent rainfall in key Brazilian coffee-growing regions has alleviated concerns about dryness. Somar Meteorologia reported that Minas Gerais, Brazil’s largest arabica coffee-producing area, received 72.1 mm of rain during the week ending November 7, which was 160% of the historical average. This suggests improved conditions for the current and upcoming coffee crops.
Increased Vietnamese Supply: On the robusta front, Vietnam is projected to increase its coffee output and exports. The Vietnam National Statistics Office reported a 13.4% year-over-year increase in coffee exports for January-October 2025, reaching 1.31 MMT. Furthermore, the 2025/26 coffee production in Vietnam is estimated to climb by 6% to 1.76 MMT (29.4 million bags), a four-year high. The Vietnam Coffee and Cocoa Association (Vicofa) also indicated that if weather conditions remain favorable, Vietnam’s 2025/26 coffee output could be 10% higher than the previous crop year. As the world’s largest producer of robusta coffee, this increase in Vietnamese supply has a notable impact on global prices.
Exchange Inventories and Global Trade
Shrinking ICE Coffee Inventories: Despite bearish supply forecasts, ICE coffee inventories have seen a significant drawdown, offering some support to prices. The implementation of 50% tariffs on U.S. imports from Brazil has led American buyers to forgo new Brazilian coffee contracts, tightening U.S. supplies. Brazil typically accounts for about a third of America’s unroasted coffee imports. Consequently, U.S. purchases of Brazilian coffee from August to October dropped by 52% compared to the same period last year, totaling 983,970 bags.
💡 ICE-monitored arabica inventories fell to a 1.75-year low of 403,190 on Friday, and ICE robusta coffee inventories declined to a 3.75-month low of 5,723 lots. This tightening of exchange-held stocks can provide underlying support for coffee prices.
Global Export Trends: Signs of tighter global coffee supplies are also providing price support. The International Coffee Organization (ICO) reported that global coffee exports for the current marketing year (October-September) decreased by 0.3% year-over-year, reaching 138.658 million bags. This slight reduction in overall export volume contributes to the narrative of a more constrained global supply.
Weather Concerns and Production Forecasts
La Niña Potential: Coffee prices found some support following an announcement by the National Oceanic and Atmospheric Administration (NOAA) on September 16. NOAA increased the likelihood to 71% of a La Niña weather system developing in the Southern Hemisphere between October and December. Such a system could bring excessive dry weather to Brazil, potentially harming the 2026/27 coffee crop, particularly the arabica variety for which Brazil is the leading global producer.
Brazilian Crop Estimate Revisions: Earlier in the season, Conab, Brazil’s crop forecasting agency, revised its 2025 arabica coffee crop estimate downward by 4.9% to 35.2 million bags on September 4, from a previous 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, down from the May estimate of 55.7 million bags. Such revisions from official agencies can influence market perceptions of supply availability.
USDA Global Coffee Production Outlook: Looking ahead to the 2025/26 season, the USDA’s Foreign Agriculture Service (FAS) projected on June 25 that world coffee production would increase by 2.5% year-over-year to a record 178.68 million bags. This increase is expected to be driven by a 7.9% rise in robusta production to 81.658 million bags, while arabica production is forecasted to decrease by 1.7% to 97.022 million bags. The FAS forecast also anticipated Brazil’s 2025/26 coffee production to rise by 0.5% to 65 million bags, and Vietnam’s output to increase by 6.9% to a four-year high of 31 million bags. Ending stocks for 2025/26 were forecasted to climb by 4.9% to 22.819 million bags from 21.752 million bags in 2024/25.
Expert Summary
Coffee markets are navigating a complex environment influenced by a mix of bearish supply signals and supportive inventory data. While increased production forecasts from Brazil and Vietnam, coupled with potential tariff reductions, are pressuring prices downward, dwindling exchange inventories and potential weather disruptions in key growing regions are providing underlying support. Traders are closely monitoring these competing factors to gauge future price direction.
