Quick Summary
- Coffee futures experienced a significant decline on Monday, with March arabica coffee (KCH26) down 2.31% and January robusta coffee (RMF26) down 1.79%.
- This downward trend is driven by projections of abundant global coffee supplies, particularly from Brazil and Vietnam.
- Brazil’s 2025 coffee production estimate was raised, and its 2026/27 forecast shows a substantial year-over-year increase.
- Vietnam’s coffee exports rose considerably in November, and its production is expected to climb in the 2025/26 season.
- A delayed EU deforestation law is also contributing to ample supply by allowing continued imports from regions prone to deforestation.
- Conversely, below-normal rainfall in Brazil’s key arabica regions and diminishing ICE coffee inventories offer some support to prices.
Coffee Market Drops Amid Ample Supply Forecasts
Coffee futures saw a sharp downturn on Monday, with March arabica (KCH26) closing down 2.31% and January robusta (RMF26) experiencing a 1.79% loss. Arabica prices reached a two-week low, while robusta touched a two-and-a-quarter-month low, signaling significant pressure on the commodity. This decline is primarily attributed to an anticipated surplus in global coffee supplies.
Brazil’s crop forecasting agency, Conab, recently revised its 2025 coffee production estimate upward by 2.4% to 56.54 million bags. Furthermore, StoneX forecasts a robust 70.7 million bags from Brazil for the 2026/27 marketing year, including a notable 29% jump in arabica output. These upward revisions point towards a substantial increase in coffee availability from one of the world’s largest producers.
💡 The Arabica coffee market is sensitive to weather patterns in Brazil. Understanding the historical rainfall averages and current precipitation levels in regions like Minas Gerais is crucial for tracking potential price movements.
Vietnam’s Export Surge and EU Regulation’s Impact on Coffee Prices
Adding to the bearish sentiment, Vietnam, the world’s leading producer of robusta coffee, reported a substantial 39% year-over-year increase in November coffee exports. Year-to-date exports are up 14.8%, indicating a strong supply pipeline from this key exporting nation. Projections for Vietnam’s 2025/26 coffee production forecast a 6% rise, potentially reaching a four-year high, further contributing to the global surplus narrative.
The European Parliament’s approval of a one-year delay for its deforestation law (EUDR) also plays a role. This regulation aims to prevent the import of commodities linked to deforestation. The delay means that countries in Africa, South America, and Indonesia can continue exporting key products like coffee to the EU without immediate compliance, ensuring a steady flow of supply and potentially dampening price increases.
Factors Supporting Coffee Prices Amid Supply Glut
Despite the overwhelming supply outlook, certain factors are providing some underlying support to coffee prices. Below-normal precipitation in Brazil’s primary arabica-growing regions, particularly Minas Gerais, has been noted. For the week ending December 5, this key region received only 17% of its historical average rainfall, a condition that could potentially impact future yields if it persists.
Shrinking inventories held in ICE warehouses also offer a counterbalance to the bearish supply news. While arabica inventories saw a slight recovery, they recently hit a 1.75-year low. The imposition of U.S. tariffs on coffee imports from Brazil has significantly reduced purchases by American buyers, leading to a sharp drawdown in ICE coffee inventories. U.S. imports from Brazil dropped by 52% between August and October following the implementation of these tariffs.
📊 U.S. tariffs on Brazilian coffee have created a unique supply dynamic. For buyers, this means a tightening of U.S. supplies from Brazil, potentially leading to higher prices for consumers or a shift to alternative sourcing regions.
Global Production Estimates and Outlook for Coffee Markets
The U.S. Department of Agriculture’s Foreign Agriculture Service (FAS) projects a record world coffee production for the 2025/26 season, estimating an increase of 2.5% year-over-year to 178.68 million bags. This projection includes a slight decrease in arabica (-1.7%) but a significant rise in robusta production (+7.9%). FAS forecasts Brazil’s 2025/26 output to grow by 0.5% to 65 million bags and Vietnam’s to increase by 6.9% to 31 million bags, marking a four-year high for Vietnam.
These increased production forecasts suggest that ending stocks for 2025/26 are expected to climb by 4.9% compared to the previous year. However, a slight counterpoint comes from the International Coffee Organization (ICO), which reported a marginal decrease of 0.3% in global coffee exports for the current marketing year. This indicates that while production is rising, export volumes, albeit slightly, are not keeping pace, potentially creating some inventory build-up.
Frequently Asked Questions about Coffee Market Trends
What is causing coffee prices to fall?
Coffee prices are currently falling due to strong projections of ample global supplies, especially from major producers like Brazil and Vietnam. Record production forecasts and increased export volumes are contributing to a bearish market sentiment.
How do Brazil’s weather patterns affect coffee prices?
Below-normal rainfall in Brazil’s key coffee-growing regions can provide temporary support to prices. Drought conditions can raise concerns about future harvests, potentially limiting supply and driving up costs.
What is the significance of the EU’s deforestation law delay for coffee?
The one-year delay in the EU’s deforestation regulation allows for continued coffee imports from regions where deforestation is a concern. This ensures a steady supply entering the EU market, preventing immediate supply disruptions that could otherwise support prices.
Are global coffee inventories decreasing?
While overall global production is expected to rise, specific warehouse inventories, like those monitored by ICE for arabica coffee, have recently fallen to multi-year lows. U.S. tariffs on Brazilian coffee imports have contributed to this drawdown in certain markets.
Navigating the Coffee Market’s Future
The coffee market remains in a delicate balance, heavily influenced by supply-side factors. While forecasts point towards increased production and ample availability, regional weather anomalies and trade policies can introduce volatility. Investors and stakeholders must closely monitor Brazilian rainfall patterns, Vietnamese export data, and any potential shifts in global trade regulations.
The interplay between robusta supply increases and the dynamics of the arabica market will continue to shape price trends. Understanding these diverse influences is key to navigating the complexities of the global coffee trade and making informed decisions in this dynamic commodity sector.
