Quick Summary
- Arabica (KCH26) and Robusta (RMF26) coffee futures saw declines on Friday.
- Weakness in the Brazilian real pressured arabica prices, encouraging exports.
- Increased export forecasts from Vietnam are weighing on robusta coffee.
- Brazil’s 2025 coffee production estimate was raised, contributing to bearish sentiment.
- Delays to the EU’s deforestation law may keep coffee supplies ample.
- Shrinking ICE coffee inventories offer some support to prices.
Coffee Market Trends and Influences
Coffee futures experienced downward pressure on Friday, with both arabica and robusta contracts closing lower. March arabica coffee (KCH26) finished down 5.65 points, representing a 1.48% decrease. Similarly, January ICE robusta coffee (RMF26) saw a decline of 7 points, a 0.16% drop. This movement reflects a complex interplay of global supply dynamics, currency fluctuations, and regulatory changes impacting the coffee market.
Arabica prices retreated due to a significant weakening of the Brazilian real. The real (^USDBRL) tumbled to a seven-week low against the dollar, making Brazilian coffee exports more attractive and cost-effective for international buyers. This currency movement directly incentivizes Brazilian producers to increase their export volumes, thereby adding to the global supply and potentially dampening price growth.
📍 Analytical Insight: Currency fluctuations, like the recent drop in the Brazilian real, can dramatically influence commodity prices. For coffee producers, a weaker local currency means that for every dollar earned from exporting, they receive more of their home currency, making exports more profitable and encouraging increased sales.
Factors Affecting Robusta and Arabica Coffee Prices
Robusta coffee, in particular, faced bearish sentiment following comments from the chairman of the Vietnam Coffee and Cocoa Association. He indicated that coffee exports are on track for an increase, with 10% of Vietnam’s robusta harvest already completed and forecasts for drier weather suggesting accelerated harvesting. As Vietnam is a leading global producer of robusta, these supply-side projections carry significant weight in the market.
Further contributing to the bearish outlook for coffee was an upward revision of Brazil’s 2025 coffee production estimate by Conab, the country’s crop forecasting agency. Conab raised its total production estimate by 2.4% to 56.54 million bags, an increase from the previous September estimate of 55.20 million bags. This bolstered expectation of ample coffee supplies from a major producing nation adds pressure on futures prices.
The prospect of abundant coffee supplies has been a persistent theme, recently exacerbated by the European Parliament’s decision to approve a one-year delay to the deforestation law. This regulation, known as EUDR, aims to curb deforestation linked to key commodity exports, including coffee. The delay allows for continued imports of agricultural products from regions like Africa, Indonesia, and South America where deforestation concerns are present, thereby ensuring a steady flow of coffee into the EU market.
Navigating Global Coffee Dynamics
While overarching supply trends suggest pressure, certain factors are providing underlying support for coffee prices. Below-normal precipitation in key arabica-growing regions of Brazil, such as Minas Gerais, has been noted. Reports indicated that the region received only 39% of its historical average rainfall for the week ending November 28, a condition that can potentially impact future yields and tighten supplies.
Shrinking inventories held in ICE-monitored exchange warehouses also contribute positively to price stability. Arabica inventories had fallen to a 1.75-year low in late November, showing some recovery by Friday. Similarly, ICE robusta coffee inventories recently dropped to an 11.25-month low. This inventory drawdown is partly attributed to U.S. tariffs on coffee imports from Brazil, which have led American buyers to seek alternative sources, tightening domestic supplies.
💡 Market Tip: Monitor inventory levels at major exchanges like ICE. Declining stocks often signal tighter available supply, which can act as a supportive factor for commodity prices, even amidst broader bearish production forecasts.
Future Coffee Production and Supply Forecasts
Looking ahead, projections for the 2026/27 marketing year suggest a significant increase in Brazilian coffee output. StoneX forecasts Brazil to produce 70.7 million bags, including 47.2 million bags of arabica, marking a substantial 29% year-over-year increase. Such robust production expectations are a key bearish indicator for future prices.
Increased coffee supplies from Vietnam are also a bearish factor. For the Jan-Oct 2025 period, Vietnam’s coffee exports rose 13.4% year-over-year. Projections indicate Vietnam’s 2025/26 coffee production could climb 6% to 1.76 million metric tons (approximately 29.4 million bags), potentially reaching a four-year high. Favorable weather conditions could even see a 10% increase in output compared to the previous year, underscoring Vietnam’s critical role in the global robusta market.
Global Coffee Commodity Analysis
Signs of tightening global coffee supplies, however, offer a counterpoint. The International Coffee Organization (ICO) reported a slight year-over-year decrease of 0.3% in global coffee exports for the current marketing year, totaling 138.658 million bags. This indicates that despite strong production in some regions, overall export volumes have seen a marginal contraction.
The USDA’s Foreign Agriculture Service (FAS) projected record world coffee production for 2025/26 at 178.68 million bags. This includes an anticipated decrease in arabica production (-1.7%) but a significant rise in robusta production (+7.9%). Specifically, FAS forecasts Brazil’s 2025/26 output at 65 million bags and Vietnam’s at 31 million bags, also a four-year high. Ending global stocks are predicted to increase by 4.9%.
📊 Data Point: The USDA’s forecast highlights a divergence within the coffee market itself: a projected decrease in arabica production contrasted with a significant increase in robusta production. This could lead to differing price performance between the two bean types.
Frequently Asked Questions about Coffee Market Trends
What is causing the current pressure on coffee prices?
Current pressure stems from a combination of a stronger U.S. dollar relative to the Brazilian real, increased production forecasts from major producers like Brazil and Vietnam, and the potential for ample global supplies due to regulatory delays like the EU deforestation law.
How are currency fluctuations impacting coffee markets?
Weakening currencies in coffee-exporting nations, such as the Brazilian real, make their products cheaper for international buyers. This increased profitability for exporters often leads to higher export volumes, which can drive down global prices.
What is the significance of the EU deforestation law delay for coffee?
The delay of the EUDR means that coffee imports into the European Union will not immediately face new stringent requirements related to deforestation. This allows for a continued, uninterrupted supply of coffee from various regions, potentially preventing supply shocks and moderating price increases.
Are coffee inventories increasing or decreasing?
While there are mixed signals, recent data shows shrinking inventories in major ICE exchanges for both arabica and robusta. This drawdown, partly due to factors like U.S. tariffs on Brazilian coffee, provides some support to prices by indicating tighter readily available supply.
What are the key global producers to watch in the coffee market?
Brazil and Vietnam are the most critical producers to monitor. Brazil is the world’s largest coffee producer overall and a key supplier of arabica. Vietnam is the leading producer of robusta coffee. Their production levels and export activities significantly influence global coffee prices.
The Outlook for Global Coffee Prices
The coffee market is currently navigating a crosscurrent of bullish and bearish factors. While robust production forecasts from Brazil and Vietnam, coupled with the delay of the EUDR, point towards ample future supplies, underlying support exists from specific inventory drawdowns and potential weather concerns in growing regions. The interplay between these elements will continue to dictate price movements in the coming months.
Traders and investors will be closely watching export data, currency movements, and further weather reports from key producing nations. The market’s reaction to official production estimates and inventory reports will be crucial in shaping the short-to-medium term trajectory for both arabica and robusta coffee futures.
