Key Takeaways
- Arabica and Robusta coffee futures saw significant gains due to dwindling inventories and concerns over weather disruptions.
- Tariffs on Brazilian coffee imports are tightening US supplies, while adverse weather in Brazil and Vietnam threatens production.
- La Niña forecasts suggest potential dry conditions for Brazil’s upcoming crop, adding to market jitters.
- Increased export projections from Vietnam could exert downward pressure on Robusta prices.
- Speculation about the potential lifting of US tariffs on Brazilian coffee is also influencing arabica prices.
Coffee Prices Surge Amidst Supply Worries
December arabica coffee futures (KCZ25) experienced a notable increase, closing up +11.05 (+2.79%), while January ICE robusta coffee futures (RMF26) also showed strength, settling higher by +118 (+2.60%). These gains were largely driven by a significant drawdown in coffee stockpiles held by ICE.
Impact of Tariffs and Inventory Levels
The imposition of a 50% tariff on imports from Brazil has directly contributed to a sharp decrease in ICE coffee inventories. Specifically, ICE-monitored arabica inventories plummeted to a 1.75-year low of 417,478 bags. Concurrently, ICE robusta coffee inventories reached a 3.5-month low of 5,926 lots. This tightening of US supplies is a direct consequence of American buyers shying away from new contracts for Brazilian coffee due to the prohibitive tariffs, especially considering Brazil’s significant role, supplying approximately one-third of the US’s unroasted coffee.
Global Production Concerns Escalate
Beyond inventory issues, broader concerns about potential disruptions to global coffee production due to adverse weather events are further bolstering coffee prices. In Brazil, a key arabica-producing nation, the largest growing region, Minas Gerais, received significantly less rainfall than usual. Reports indicated only 33.4 mm of rain for the week ended October 31, a mere 75% of the historical average, following an even drier preceding week with only 1% of normal rainfall. Meanwhile, in Vietnam, a major robusta producer, Typhoon Kalmaegi made landfall, raising concerns among their weather agency about heavy rains potentially causing flash floods and landslides in the Central Highlands, a critical coffee-growing area, which could damage robusta crops.
La Niña Forecast Adds to Market Uncertainty
Further supporting coffee prices, the National Oceanic and Atmospheric Administration (NOAA) updated its forecast on September 16, increasing the likelihood to 71% of a La Niña weather system developing in the southern hemisphere between October and December. Such a system could bring excessively dry weather to Brazil, potentially impacting the 2026/27 coffee crop. Brazil’s position as the world’s leading producer of arabica coffee makes any threat to its harvest a significant market factor.
Vietnam’s Export Surge and Production Outlook
Conversely, the prospect of increased Vietnamese coffee supplies presents a bearish factor for prices, particularly for robusta. Data released on Thursday by the Vietnam National Statistics Office showed a year-over-year increase of 13.4% in Vietnam’s coffee exports from January to October 2025, reaching 1.31 million metric tons. Projections for the 2025/26 coffee production in Vietnam indicate a further climb of 6% year-over-year to 1.76 million metric tons (29.4 million bags), a four-year high. Reinforcing this outlook, the Vietnam Coffee and Cocoa Association (Vicofa) stated on October 24 that Vietnam’s 2025/26 coffee output could be up to 10% higher than the previous crop year, contingent on favorable weather conditions. Vietnam’s status as the world’s largest producer of robusta coffee means these increased supplies could influence global robusta markets.
Speculation on US-Brazil Tariffs
Arabica coffee prices are also being influenced by speculation regarding the potential removal of the 50% US tariff on Brazilian coffee. Recent discussions, including a surprisingly good meeting between Brazil’s President Luiz Inacio Lula da Silva and President Trump, have fostered expectations of a definitive solution to US-Brazil trade issues emerging within days.
Global Export Trends and Supply Assessments
Broader market sentiment is also shaped by global trade data. The International Coffee Organization (ICO) reported on October 6 that global coffee exports for the current marketing year (October to August) saw a slight increase of 0.2% year-over-year, reaching 127.92 million bags. This indicates generally adequate export volumes and supply levels in the global market.
Brazilian Crop Estimates Adjusted
Coffee prices have found some support following adjustments to Brazil’s crop estimates. Conab, Brazil’s official crop forecasting agency, revised its 2025 arabica coffee crop estimate downward by 4.9% to 35.2 million bags on September 4, a reduction from the May forecast of 37.0 million bags. The agency also trimmed its total Brazil 2025 coffee production estimate by 0.9% to 55.2 million bags, down from 55.7 million bags predicted in May.
USDA and FAS Projections for 2025/26
The USDA’s Foreign Agriculture Service (FAS) projected on June 25 that world coffee production for the 2025/26 season is set to increase by 2.5% year-over-year, reaching a record 178.68 million bags. This growth is expected to be driven by a 7.9% rise in robusta production to 81.658 million bags, offsetting a projected 1.7% decrease in arabica production to 97.022 million bags. The FAS forecasts Brazil’s 2025/26 coffee production to rise by 0.5% year-over-year to 65 million bags, while Vietnam’s output is expected to climb 6.9% year-over-year to a 4-year high of 31 million bags. Furthermore, FAS anticipates that 2025/26 ending stocks will increase by 4.9% to 22.819 million bags, up from 21.752 million bags in 2024/25.
Final Thoughts
The coffee market is currently navigating a complex interplay of declining inventories, weather-related production risks, and geopolitical trade dynamics. While tightening supplies and adverse weather forecasts are providing upward price pressure, potential increases in Vietnamese exports and speculation around US tariffs add layers of volatility.
