NY Coffee Prices Continue Lower on Possible US-Brazil Trade Thaw

Coffee prices, including December arabica and November robusta, extended sharp declines today, primarily driven by hopes for a resolution to US tariffs on Brazilian imports following positive diplomatic talks between the two nations' presidents. This bearish pressure is compounded by forecasts for increased robusta output and exports from Vietnam in 2025/26, contributing to projections of record global coffee production. However, underlying support for prices remains due to severe drought conditions in Brazil's key arabica-growing regions, threatening the 2026/27 crop, coupled with shrinking ICE coffee inventories exacerbated by current US tariffs on Brazilian coffee, and an increased likelihood of a La Niña event.

Analysis

December arabica and November robusta coffee futures declined by -2.58% and -2.43% respectively, extending sharp losses from late last week. This downturn is primarily driven by hopes for a resolution to US tariffs on Brazilian imports, following positive diplomatic talks between the US and Brazilian presidents that could yield a "definitive solution" on trade within days.

Further bearish pressure stems from robusta supply forecasts, with Vietnam's 2025/26 coffee output projected to rise by 10% and its exports already up 10.9% year-over-year. The USDA FAS forecasts record global coffee production for 2025/26 at 178.68 million bags, driven by a 7.9% increase in robusta output, indicating adequate overall supplies.

Conversely, underlying support for coffee prices persists due to severe drought in Brazil's Minas Gerais, which received only 1% of its historical average rainfall last week, threatening the 2026/27 crop. The increased 71% likelihood of a La Niña event exacerbates concerns for Brazilian output, while ICE-monitored arabica inventories have fallen to a 1.5-year low.

Key Decisions for Investors

• Investors should closely monitor developments in US-Brazil trade negotiations, as a definitive resolution on tariffs could significantly impact coffee import dynamics and price stability.
• Given the conflicting supply signals, with robusta production increasing but Brazilian arabica facing drought-related risks and La Niña threats, investors should differentiate between arabica and robusta market outlooks.
• It is prudent to observe ICE inventory trends and US import patterns, as current low levels and disrupted Brazilian supply could create short-term price volatility despite projections for higher global output.