Coffee Prices Gain as ICE Inventories Continue to Shrink

Coffee prices are climbing, with robusta reaching a 1-month high, primarily driven by shrinking ICE inventories and the impact of 50% tariffs on US imports from Brazil, which are tightening US supplies. Arabica prices are supported by severe dry conditions in Brazil's Minas Gerais, a 71% likelihood of a La Niña weather system threatening the 2026/27 crop, and Conab's reduced 2025 arabica crop estimate. Volcafe further projects a widening 2025/26 arabica deficit of 8.5 million bags. Conversely, robusta faces bearish pressure from abundant rainfall in Vietnam, which is expected to bolster a projected 6% increase in 2025/26 production and strong year-over-year export growth from the country.

Analysis

Coffee prices are broadly advancing, with November robusta up +2.60% to a one-month high and December arabica up +0.39%. This upward momentum is primarily driven by shrinking ICE coffee inventories, with arabica stocks at a 1.5-year low of 494,558 bags and robusta at a 2.75-month low of 6,177 lots. The 50% tariffs on US imports from Brazil are significantly tightening US supplies, as Brazil accounts for approximately one-third of America's unroasted coffee.

Arabica prices are further supported by severe dry conditions in Brazil's Minas Gerais, which received only 48% of its historical average rainfall, raising concerns for the 2026/27 crop's critical flowering phase. NOAA increased the likelihood of a La Niña weather system to 71% for October-December, threatening further dry weather. Conab reduced its Brazil 2025 arabica crop estimate by 4.9% to 35.2 million bags, while Volcafe projects a widening global 2025/26 arabica deficit of 8.5 million bags.

Conversely, robusta coffee faces bearish pressure from robust supply conditions in Vietnam, the world's largest robusta producer. Vietnam's Central Highlands anticipate above-average rainfall, supporting crop development, and its Jan-Sep 2025 exports increased by 10.9% year-over-year to 1.230 MMT. The USDA's FAS projects Vietnam's 2025/26 robusta output to climb 6.9% year-over-year to a four-year high of 31 million bags, contributing to a forecasted 7.9% increase in global robusta production.

Key Decisions for Investors

• Consider long positions in arabica futures, given the widening deficit projections, Brazilian supply concerns, and adverse weather outlook.
• Monitor robusta supply dynamics closely, as strong Vietnamese production and exports could cap price appreciation despite overall market bullishness.
• Evaluate the impact of US-Brazil tariffs on specific supply chains and potential for further inventory drawdowns, which could exacerbate price volatility.