NY Coffee Prices Climb as Conab Cuts its Brazil Coffee Production Forecast

Coffee prices are experiencing mixed trends, with arabica gaining and robusta declining. Key support stems from Brazil's Conab cutting its 2025 arabica crop estimate by 4.9% and overall production by 0.9%, alongside tightening ICE inventories reaching multi-year lows and reduced global coffee exports. New US tariffs on Brazilian coffee are further constricting US supply. Countering these bullish factors are advanced harvest progress and favorable rainfall in Brazil; however, Volcafe's projection of a widening 2025/26 global arabica deficit, despite some USDA forecasts for increased overall production, signals ongoing supply concerns.

Analysis

The coffee market is exhibiting divergent trends and conflicting fundamental signals, with arabica futures (KCZ25) gaining while robusta (RMX25) declines. Bullish sentiment is underpinned by significant supply-side constraints. Brazil's crop forecasting agency, Conab, reduced its 2025 arabica crop estimate by 4.9% to 35.2 million bags, a key driver for arabica's strength. This is compounded by tightening physical inventories, with ICE-monitored arabica stocks falling to a 1.25-year low and robusta inventories at a one-month low. Furthermore, global and Brazilian-specific export data show marked declines; the ICO reported a 1.6% y/y drop in global July exports, while Brazil's July unroasted coffee exports plunged 20.4% y/y. A 50% US tariff on Brazilian beans is also constricting supply in the American market. Offsetting these bullish indicators are bearish pressures from Brazil's nearly complete harvest (99% as of August 20) and favorable weather, with recent rainfall in Minas Gerais at 163% of the historical average, which improves prospects for the next crop. The long-term outlook is highly uncertain due to starkly contrasting forecasts: the USDA projects a record world production for 2025/26, driven by a 7.9% rise in robusta, while private forecaster Volcafe anticipates a widening global arabica deficit for a fifth consecutive year.

Key Decisions for Investors

• Investors should differentiate strategies between arabica and robusta, as current bullish catalysts like Conab's downgrade and Volcafe's deficit forecast are arabica-specific, whereas the USDA's projection for production growth is heavily weighted toward robusta.
• Closely monitor near-term indicators such as weekly ICE inventory levels and upcoming Brazilian export data to gauge whether current supply tightness will outweigh the bearish pressure from the nearly complete 2025 harvest.
• Given the significant divergence between the USDA's forecast for a record crop and Volcafe's projection of a deepening deficit, it is prudent to exercise caution with long-term directional positions until clearer global production trends emerge.
• Traders should assess the regional price impact of the 50% US tariff on Brazilian coffee, as this policy is tightening supply specifically within the US market and may sustain a premium for non-Brazilian origins domestically.