Coffee Prices Sharply Lower as Global Supply Concerns Ease

Coffee prices are sharply lower this week, with robusta hitting a 13-month low and arabica a 5-month low, driven by an improving supply outlook from Brazil's ongoing harvest; Safras & Mercado reported Brazil's 2025/26 harvest 35% complete as of June 11. Recent rainfall in Brazil's Minas Gerais, the largest arabica-growing area, has eased dryness concerns, further weighing on prices. While robusta inventories are declining, arabica inventories remain elevated, adding to the bearish sentiment despite smaller coffee exports from Brazil and reduced Vietnam production forecasts.

Analysis

Coffee prices are experiencing significant downward pressure, with arabica reaching a 5-month low and robusta a 13-month low, primarily driven by an improving supply outlook from Brazil. The ongoing Brazilian harvest for 2025/26 is reported to be 35% complete, which is in line with the 5-year average, signaling a steady and predictable supply influx. This sentiment is reinforced by beneficial weather, as Brazil's key arabica region of Minas Gerais received 131% of its historical average rainfall, alleviating previous dryness concerns. The market narrative is further skewed bearish for arabica by ICE-monitored inventories, which recently hit a 4.5-month high. However, this near-term bearishness is contrasted by several underlying bullish factors. Robusta inventories have fallen to a 1-month low, and Vietnam's 2023/24 crop was the smallest in four years. Moreover, long-term global supply appears tight, with the USDA forecasting 2024/25 ending stocks to fall to a 25-year low and Volcafe projecting a fifth consecutive year of arabica deficits for 2025/26. This creates a market characterized by conflicting signals: near-term supply relief from Brazil is currently outweighing significant long-term structural supply concerns.

Key Decisions for Investors

• Given the strong downward price momentum fueled by the progressing Brazilian harvest and favorable weather, investors should be cautious of being long in the near term, as sentiment remains bearish with arabica hitting a 5-month low.
• Monitor the significant disconnect between current price action and long-term supply fundamentals, such as the USDA's forecast for 25-year low ending stocks and Volcafe's projection of a widening arabica deficit, which could lead to a sharp price reversal.
• Pay close attention to weekly updates on Brazil's harvest pace and ICE-monitored inventory levels for both arabica and robusta, as any slowdown in the harvest or a significant drawdown in stocks could be a primary catalyst for a shift from the current bearish outlook.