Coffee Prices Climb on Supply Concerns and Shrinking ICE Inventories

Coffee prices are currently climbing due to immediate supply concerns, driven by anticipated new tariffs on Colombian coffee, existing U.S. import tariffs on Brazilian beans leading to tightening supplies and declining ICE inventories, and a projected fifth consecutive annual arabica deficit for 2025/26. Counteracting these bullish pressures are hopes for the removal of Brazilian tariffs, recent beneficial rainfall in Brazil's key growing regions, and robusta supply strength from Vietnam, which reported increased exports and a forecast bumper crop, contributing to a mixed market outlook despite USDA FAS projecting record global coffee production for 2025/26.

Analysis

Coffee prices are currently experiencing upward momentum, with December arabica (KCZ25) and November robusta (RMX25) up +1.16% and +1.53% respectively, driven by immediate supply concerns. Anticipated new tariffs on Colombian coffee, the world's second-largest arabica producer, coupled with existing 50% tariffs on Brazilian imports, are tightening US supplies and contributing to ICE-monitored arabica inventories falling to a 19-month low of 467,110 bags. ICE robusta inventories also fell to a 3-month low of 6,160 lots.

However, several factors present a bearish counterpoint to this upward trend. Hopes for the removal of Brazilian tariffs, following "very positive talks" between US and Brazilian officials, could alleviate supply pressures. Furthermore, recent beneficial rainfall in Brazil's Minas Gerais region, receiving 136% of its historical average, eases immediate dry weather concerns for the world's largest arabica producer.

The long-term supply outlook remains mixed, reflecting a complex interplay of factors. While Volcafe projects a fifth consecutive global arabica deficit for 2025/26, widening to -8.5 million bags, the USDA FAS forecasts a record 2025/26 world coffee production increase of +2.5% to 178.68 million bags, primarily driven by a +7.9% increase in robusta output and rising ending stocks. Vietnam's robusta exports are up +10.9% year-over-year, with a projected 6% increase in 2025/26 production, further contributing to robusta supply strength.

Key Decisions for Investors

• Monitor developments in US-Colombia and US-Brazil trade policy closely, as tariff decisions will significantly impact near-term supply and price volatility.
• Evaluate the divergence between arabica and robusta market fundamentals, considering potential long-term arabica deficits against robusta's projected supply growth.
• Track weather patterns in key growing regions like Brazil and Vietnam, particularly the evolving La Niña forecast, which could introduce significant volatility for the 2026/27 crop.