Coffee prices experienced a notable decline at the end of the trading week, reflecting a complex interplay of supply dynamics and market pressures. On July 14, arabica coffee futures closed down by 1.70 cents, or 0.47%, while robusta coffee fell by 153 dollars, representing a substantial drop of 3.33%. This downward shift follows an initial rally earlier in the week, driven largely by concerns over harvest prospects in Brazil and increased coffee exports from Vietnam.
Recent reports from the Brazilian agricultural consultancy Safras & Mercado indicated that as of June 4, Brazil’s coffee harvest for the 2025/26 season was 28% complete, slightly surpassing the five-year average of 27% for this time of year. Despite this progress, the market remains sensitive to forecasts of reduced crop yields, particularly in Brazil’s leading arabica-growing region, Minas Gerais, where rainfall has been notably absent. According to Somar Meteorologia, this region received no rain during the week ending May 31, raising worries among producers about the potential for diminished coffee quality and volume.
The market’s volatility has also been influenced by Brazil’s appreciating currency, the real, which reached a seven-and-a-half-month high against the dollar on Friday. A stronger real often discourages export activity as local prices rise, prompting Brazilian coffee producers to minimize sales abroad. Nevertheless, these gains in pricing power for producers stand against broader, bearish trends in coffee stocks and production expectations.
Throughout the past month, coffee prices have been under considerable pressure, with arabica coffee futures falling to their lowest levels in nearly two months. Robust coffee has also seen significant declines, hitting seven-month lows largely due to expectations of increased global supply. The U.S. Department of Agriculture’s Foreign Agricultural Service (FAS) recently projected a 0.5% rise in Brazil’s coffee production year-over-year, estimating output to reach 65 million bags. Similarly, Vietnam’s coffee output is forecasted to increase by 6.9% to 31 million bags in the same timeframe.
Market analysts point to a significant uptick in coffee inventories monitored by the Intercontinental Exchange (ICE) as another contributing factor to the current price decline. As of May 30, ICE-monitored robusta inventories were observed at an eight-and-a-half-month high of 5,438 lots, while arabica inventories rose to a four-month high of 892,468 bags. This swelling of stocks underscores the market’s ongoing concerns regarding supply-demand balances.
The dynamics shaping coffee prices are further compounded by fluctuating export trends. For instance, Brazil’s export numbers have been mixed; Cecafe reported a sharp 28% year-on-year drop in April exports to 3.05 million bags, while cumulative January-April exports fell by 15.5% to 13.186 million bags. These declines signal potential supply shortages, but the trend is somewhat mitigated by rising output forecasts from both Brazil and Vietnam.
On the production front, the USDA has also highlighted the challenges faced by key coffee-exporting nations. In Central America, for example, Honduras, which is the largest coffee producer in the region, is projected to see its output increase by 5.1% year-over-year to reach 5.8 million bags. Meanwhile, Brazil’s crop forecasting agency, Conab, has revised its production estimate for the 2025 season upwards, now projecting 55.7 million bags, an increase from an earlier forecast of 51.81 million.
Counterbalancing these factors, however, are rising demand concerns that add bearish momentum to the market. High import tariffs recently announced by major global commodity importers such as Starbucks and Hershey are anticipated to stifle sales volumes, further complicating the market landscape. Particularly concerning for robusta coffee is the adverse weather in Vietnam. The country has experienced a 20% decline in coffee production for the 2023/24 crop year, dropping to approximately 1.472 million metric tons, marking the smallest harvest in four years.
In addition, forecasts for future production in Vietnam have been adjusted downward, with the Vietnam Coffee and Cocoa Association decreasing its 2024 coffee production estimate to 26.5 million bags from a prior prediction of 28 million. Nevertheless, the USDA’s latest reports suggest an upcoming recovery, projecting the 2025/26 Vietnamese coffee crop to hit a four-year high of 30 million bags.
The overarching theme in the coffee market includes fears of a long-term supply shortfall. Notably, Volcafe recently revised its Brazil arabica coffee production estimate for the 2025/26 marketing year to 34.4 million bags, down significantly from previous forecasts following crop tours that revealed severe drought conditions affecting Brazilian agriculture. This trend contributes to a wider projected global deficit of arabica coffee, expected to reach 8.5 million bags for the 2025/26 growing season, extending a streak of five consecutive deficit years.
As the industry continues to grapple with these complexities, the outlook remains clouded by uncertainties surrounding both supply disruptions and demand fluctuations. The interplay of these various factors will be critical for stakeholders, from farmers to consumers, as they navigate what promises to be a dynamic and challenging market landscape for coffee trading in the coming months.
In light of these developments, stakeholders across the globe are closely monitoring the situation, understanding that volatility in the coffee market can have far-reaching implications for pricing, trade dynamics, and consumer accessibility to one of the world’s most beloved beverages.