Adverse Global Weather Lifts Coffee Prices

Coffee prices are advancing, with arabica sharply higher at a 1.5-week high, primarily due to adverse weather concerns in Brazil, including low rainfall and a La Niña forecast, alongside shrinking ICE arabica inventories, which have reached a 1.75-year low, partly exacerbated by the 50% US tariffs on Brazilian imports. While speculation suggests these tariffs might soon be lifted, robusta prices face counter-pressure from increased Vietnamese supplies, with 2025/26 production projected to hit a four-year high. Despite a cut in Brazil's 2025 arabica crop estimate, the USDA's FAS forecasts an overall 2.5% increase in world coffee production for 2025/26 and a rise in ending stocks, indicating a mixed global supply outlook.

Analysis

December arabica coffee (KCZ25) surged +2.84% to a 1.5-week high, primarily on concerns over adverse weather in Brazil and critically low ICE inventories. Brazil's Minas Gerais received only 33.4 mm of rain last week, 75% of average, compounded by a 71% La Niña probability threatening the 2026/27 crop. ICE-monitored arabica inventories hit a 1.75-year low of 430,270 bags, exacerbated by 50% US tariffs on Brazilian imports.

These tariffs have tightened US supplies, as American buyers void contracts, but speculation suggests a potential lifting following recent US-Brazil presidential talks. Conab also cut Brazil's 2025 arabica crop estimate by -4.9% to 35.2 million bags, reinforcing supply concerns for this variety.

In contrast, robusta coffee (RMF26) saw a modest +0.49% gain, facing significant bearish pressure from increased Vietnamese supplies. Vietnam's Jan-Sep 2025 exports rose +10.9% year-over-year, and its 2025/26 production is projected to climb +6% to a 4-year high of 1.76 MMT.

This creates a mixed supply outlook: immediate arabica scarcity and weather risks are offset by robusta abundance and projected future global production increases, with the USDA's FAS forecasting world coffee production in 2025/26 to increase +2.5% to a record 178.68 million bags and ending stocks to climb +4.9%.

Key Decisions for Investors

• Monitor weather developments in Brazil, particularly La Niña's impact, as these will heavily influence arabica supply and price volatility.
• Watch for official announcements regarding the potential lifting of the 50% US tariff on Brazilian coffee, as its removal would likely ease arabica supply constraints and could depress prices.
• Consider the divergence between arabica and robusta fundamentals, with robusta facing potential oversupply from Vietnam, which may present hedging or arbitrage opportunities.
• Evaluate long-term positions against USDA's FAS projections for record global production and increased ending stocks in 2025/26, which could cap upside despite current regional deficits.