Arabica Coffee Closes Lower on Brazil Harvest Pressures

Coffee prices settled mixed Thursday as arabica fell to a one-week low amid ongoing pressure from Brazil's coffee harvest, which is slightly ahead of last year's pace, while robusta saw modest gains driven by short-covering after ICE-monitored robusta inventories fell to a three-week low. Despite recent rainfall in Brazil easing dryness concerns, forecasts from the USDA point to increased coffee production in both Brazil and Vietnam for the 2025/26 season, although reduced exports from Vietnam and an anticipated global arabica deficit in 2025/26 by Volcafe could provide some price support.

Analysis

Coffee markets exhibited divergent trends, with July arabica futures (KCN25) declining -2.85 (-0.81%) to a one-week low, while July ICE robusta futures (RMN25) registered a modest gain of +5 (+0.11%). Arabica prices are primarily pressured by the ongoing Brazilian coffee harvest; Brazil's Cooxupe co-op reported its harvest 13.7% complete, marginally ahead of last year's 13.6%, and Safras & Mercado indicated the broader 2025/26 harvest was 28% complete as of June 4, slightly above the 27% five-year average. This harvest progress, recent above-normal rainfall in Brazil's Minas Gerais region (207% of historical average for the week ended June 7), and ICE-monitored arabica inventories reaching a 4-1/4 month high of 892,468 bags on May 27, have contributed to arabica's fall to a 2-month low recently. Conversely, robusta found support from signs of tightening near-term supply, evidenced by ICE-monitored robusta inventories declining to a 3-week low of 5,184 lots. Global production forecasts present a mixed outlook: the USDA's Foreign Agricultural Service (FAS) projects Brazil's 2025/26 output to increase by +0.5% y/y to 65 million bags and Vietnam's 2025/26 output by +6.9% y/y to P31 million bags, with world 2024/25 production seen up +4.0% y/y to 174.855 million bags. However, supportive factors include Brazil's May green coffee exports falling -36% y/y to 2.8 million bags and significant past production issues in Vietnam, where the 2023/24 crop dropped -20% to 1.472 MMT due to drought. While the USDA FAS anticipates a +7% y/y rise in Vietnam's 2025/26 robusta crop to a 4-year high of 30 million bags, the Vietnam Coffee and Cocoa Association cut its 2024/25 Vietnam coffee production estimate to 26.5 million bags. Critically, global 2024/25 ending stocks are forecasted by USDA FAS to fall -6.6% to a 25-year low of 20.867 million bags, and Volcafe projects a widening global 2025/26 arabica coffee deficit of -8.5 million bags, marking the fifth consecutive year of such deficits.

Key Decisions for Investors

• Investors should closely monitor Brazil's ongoing coffee harvest progression and prevailing weather patterns, as these factors are key near-term drivers influencing arabica price direction.
• Vigilance regarding ICE inventory levels for both arabica and robusta, alongside export data from major producers like Brazil and Vietnam, is crucial for assessing short-term supply dynamics and potential price volatility.
• It is advisable to consider the contrasting signals of immediate harvest pressure and favorable near-term production forecasts against projections of a sustained global arabica deficit and historically low ending stocks when formulating medium to long-term investment strategies.
• Evaluate the divergent production forecasts for Vietnamese robusta, particularly the differences between USDA FAS projections and local association estimates, to gain a clearer perspective on future robusta supply conditions.