Coffee Prices Rebound Mildly Higher After Posting New Lows

Coffee futures rebounded Friday after hitting multi-week and multi-month lows, driven by pre-weekend short covering amidst ongoing pressure from Brazil's coffee harvest progress, where Cooxupe reported its members' harvest 13.7% complete. Overall, coffee prices remain weak due to expectations of increased global production, particularly from Brazil and Vietnam, despite some concerns about reduced robusta output in Vietnam due to drought and smaller coffee exports from Brazil.

Analysis

July arabica and robusta coffee futures rebounded from multi-week and multi-month lows respectively, primarily due to pre-weekend short covering, although broader prices remain under pressure from Brazil's ongoing coffee harvest. Cooxupe, Brazil's largest coffee cooperative, reported its members' harvest at 13.7% complete, consistent with last year, while Safras & Mercado indicated Brazil's overall 2025/26 harvest was 35% complete by June 11, with heavy rains slowing the arabica portion. This harvest momentum, combined with recent above-normal rainfall in Brazil's key Minas Gerais arabica region (207% of historical average) and a USDA Foreign Agricultural Service (FAS) forecast for Brazil's 2025/26 production to increase 0.5% year-over-year (y/y) to 65 million bags, exerts bearish pressure. However, conflicting signals emerge as Brazil's May green coffee exports fell sharply by 36% y/y. For robusta, ICE-monitored inventories declined to a 1-month low, offering price support, while Vietnam's 2023/24 crop decreased by 20% due to drought, and its 2024 coffee exports are down 17.1% y/y. Despite Vietnam's Coffee and Cocoa Association cutting its 2024/25 production estimate, the USDA FAS projects a 6.9% y/y increase in Vietnam's 2025/26 output. Globally, the USDA FAS anticipates a 4.0% y/y rise in world coffee production for 2024/25 but, significantly, forecasts global ending stocks to contract by 6.6% to a 25-year low. Adding to the complexity, Volcafe projects the global 2025/26 arabica deficit will widen to -8.5 million bags, representing the fifth consecutive year of deficit and underscoring a structural supply tightness for arabica despite current harvest activities.

Key Decisions for Investors

• Investors should carefully weigh the prevailing short-term bearish pressure from the Brazilian harvest and favorable crop weather against the significant medium-to-long-term bullish indicators, such as the projected fifth consecutive arabica deficit and critically low global ending stocks.
• Closely monitor Brazilian harvest progress, export figures, and rainfall patterns, as these will be key short-term price drivers for arabica; similarly, track Vietnamese robusta production recovery and export trends for their distinct market impact.
• Consider strategies that account for potential price divergence between arabica, which faces a persistent structural deficit according to Volcafe, and robusta, for which the USDA forecasts a stronger supply rebound.
• Be prepared for continued price volatility as the market attempts to reconcile immediate supply availability from the ongoing harvest with longer-term structural supply constraints and tightening global inventories.