July arabica coffee (KCN26) on Thursday closed down -2.75 (-0.99%), and July ICE robusta coffee (RMN26) closed up +5 (+0.14%).
Coffee prices on Thursday gave up early gains and settled mixed as a rally in the dollar index ($DXY) to a 13-month high sparked long liquidation in coffee futures. Coffee prices have rallied sharply over the past week, hitting 5-week highs on Thursday, amid concerns that persistent rain in Brazil will delay the coffee harvest. Forecaster Vaisala said moderate to heavy rainfall is forecast across Brazil’s coffee-growing regions this week. Coffee prices also fell back from their best level after meteorologist Climatempo said that Brazil’s key coffee-growing regions are expected to see mostly dry weather next week.
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ICE coffee inventories have trended lower over the past three months, which is supportive of coffee prices. ICE arabica coffee inventories fell to a 2.25-year low of 394,267 bags on Thursday. Meanwhile, ICE robusta inventories fell to a 2-year low of 3,631 lots on May 15 but jumped to a 2.25-month high of 4,032 lots on Thursday.
Concerns that an El Niño weather pattern could hurt Brazil’s coffee crop next year are supportive for prices. Coffee trader Commercial said the El Niño weather pattern may delay rains in Brazil this September and October, when tree flowering normally occurs, hurting Brazil’s 2026/27 coffee crop.
The US National Oceanic and Atmospheric Administration (NOAA) estimates an 67% probability of a “Super El Niño” this year that could be the strongest on record. Last Wednesday, the Japan Meteorological Agency confirmed an El Niño weather pattern had formed across the equatorial Pacific. This sets the stage for months of floods, droughts, and temperature fluctuations later this year that could hinder coffee production in Asia and South America.
Last Tuesday, arabica coffee fell to a 19-month nearest-futures low, and robusta slid to a 2-month low, amid an outlook for a bumper coffee crop in Brazil this year. On June 3, the USDA’s Foreign Agricultural Service (FAS) forecast a record 2026/27 Brazil coffee crop of 71.9 million bags, up +14% y/y. Also, Rabobank raised its 2026/27 global arabica coffee surplus estimate to 9.5 million bags from 7.0 million bags previously. In addition, Cecafe reported last Thursday that Brazil’s May green coffee exports rose +4.2% y/y to 2.73 million bags.
Soaring coffee exports from Vietnam, the world’s largest robusta producer, are bearish for robusta prices. On June 2, Vietnam’s National Statistics Office reported that Vietnam’s 2026 coffee exports (Jan-May) rose by +7.9% y/y to 922,000 MT. Vietnam’s 2025 coffee exports jumped by +17.5% y/y to 1.58 MMT. Also, Vietnam’s 2025/26 coffee production is projected to climb +6% y/y to a 4-year high of 1.76 MMT (29.4 million bags).
The ongoing closure of the Strait of Hormuz has disrupted global coffee supplies and is bullish for prices. The closure of the Strait has tightened coffee supplies by increasing global shipping rates, insurance, fertilizer, and fuel costs, thus raising costs for coffee importers and roasters.
As a bearish factor, the International Coffee Organization (ICO) reported on November 7 that global coffee exports for the current marketing year (Oct-Sep) fell -0.3% y/y to 138.658 million bags.
The USDA’s Foreign Agriculture Service (FAS) bi-annual report on December 18 projected that world coffee production in 2025/26 will increase by +2.0% y/y to a record 178.848 million bags, with a -4.7% decrease in arabica production to 95.515 million bags and a +10.9% increase in robusta production to 83.333 million bags. FAS forecasted that Brazil’s 2025/26 coffee production will decline by -3.1% y/y to 63 million bags and that Vietnam’s 2025/26 coffee output will rise by 6.2% y/y to a 4-year high of 30.8 million bags. FAS forecasts that 2025/26 ending stocks will fall by -5.4% to 20.148 million bags from 21.307 million bags in 2024/25.
On the date of publication,
Rich Asplund
did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.
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