Coffee Prices Supported by Tighter ICE Inventories

Coffee prices surged today, primarily due to critically low ICE coffee inventories, exacerbated by 50% US tariffs on Brazilian imports, which have driven arabica stocks to a 1.75-year low and robusta to a 3.5-month low. Further bullish pressure stems from adverse weather concerns in key growing regions, including drought in Brazil and typhoon threats in Vietnam, alongside a high probability of a La Niña impacting future crops. Counterbalancing these gains, increased Vietnamese exports and projected higher 2025/26 production, coupled with speculation about a potential US tariff removal on Brazilian coffee and USDA forecasts for record global output, present potential headwinds for sustained price appreciation.

Analysis

Coffee prices surged today, with December arabica up 2.44% and January robusta up 2.67%, primarily driven by critically low ICE inventories. Arabica stocks fell to a 1.75-year low of 418,203 bags, while robusta inventories reached a 3.5-month low of 5,926 lots, exacerbated by the 50% US tariffs on Brazilian imports. These tariffs have led American buyers to void contracts, tightening US supplies, as Brazil accounts for approximately one-third of America's unroasted coffee.

Adverse weather conditions are further underpinning prices, with Brazil's Minas Gerais receiving only 75% of its historical average rainfall in late October and Vietnam facing typhoon-induced flood risks to robusta crops. The 71% likelihood of a La Niña system from October to December also raises concerns for dry weather impacting Brazil's 2026/27 crop, following Conab's recent -4.9% cut to Brazil's 2025 arabica estimate.

However, significant bearish pressures exist, including increased Vietnamese coffee supplies, with Jan-Oct 2025 exports up 13.4% year-over-year and 2025/26 production projected to climb 6% to a four-year high. Speculation regarding a potential lifting of US tariffs on Brazilian coffee, following recent high-level discussions, could also alleviate supply constraints. Furthermore, USDA FAS forecasts for 2025/26 indicate a record global coffee production increase of 2.5% year-over-year, alongside a 4.9% rise in ending stocks, despite a projected 1.7% decrease in arabica production.

Key Decisions for Investors

• Monitor developments on US-Brazil trade tariffs closely, as a resolution could significantly impact arabica prices and supply dynamics.
• Evaluate coffee futures positions considering the immediate bullish drivers from low inventories and adverse weather against the longer-term bearish outlook from projected record global production and increased Vietnamese exports.
• Assess the potential impact of La Niña on Brazil's 2026/27 crop, which could introduce further volatility despite overall robusta supply increases.