Coffee Prices Fall on Brazil Harvest Pressures and Stronger Vietnam Exports

Coffee futures declined Friday, reversing earlier gains, due to increased harvest activity in Brazil and a surge in Vietnam's coffee exports; specifically, Brazil's 2025/26 coffee harvest is slightly ahead of its 5-year average, and Vietnam's May coffee exports jumped 59% year-over-year. Despite concerns about adverse weather in Brazil's coffee-growing regions and a stronger Brazilian real which could have supported prices, the impact of rising production forecasts and ample supplies, as highlighted by the USDA, continue to weigh on the market. Recent increases in ICE-monitored coffee inventories further contribute to the downward pressure on prices.

Analysis

Coffee prices retreated, with July arabica KCN25 falling -0.47% and July robusta RMN25 declining -3.33%, as Brazilian harvest pressures and a surge in Vietnamese exports overshadowed initial bullish sentiment. Brazil's 2025/26 coffee harvest reached 28% completion by June 4, slightly ahead of the 27% five-year average, while Vietnam's May coffee exports surged +59% year-over-year to 148,000 MT, contributing to the downturn. Although concerns over dry weather in Brazil's Minas Gerais region and a strengthening Brazilian real (which hit a 7-3/4 month high against the dollar, typically discouraging exports) initially supported prices, the market succumbed to broader supply expectations. Multiple forecasts point to increased production: the USDA FAS projects Brazil’s 2025/26 output will rise +0.5% to 65 million bags and Vietnam’s +6.9% to 31 million bags, with Safras & Mercado and Conab also revising their Brazilian estimates upwards. This outlook is reinforced by rising ICE-monitored inventories, with robusta stocks at an 8.5-month high and arabica at a 4-month high. Demand-side concerns also emerged, with major importers like Starbucks (SBUX), Hershey (HSY), and Mondelez (MDLZ) noting potential US tariff impacts on sales. However, conflicting data persists: Cecafe reported Brazil's April green coffee exports fell -28% y/y, and Volcafe forecasts a significant global arabica deficit of -8.5 million bags for 2025/26 due to prior drought impacts in Brazil. Additionally, the USDA anticipates global 2024/25 ending stocks will fall to a 25-year low, despite projecting higher overall production.

Key Decisions for Investors

• Given the prevailing bearish sentiment driven by harvest progress and strong near-term export figures from Vietnam, investors should anticipate potential short-term price weakness in coffee futures.
• Closely track upcoming Brazilian weather reports and actual harvest outturns, alongside official export data from key producers, as these could significantly shift market sentiment due to conflicting long-term production forecasts and tight global stock projections from some analysts like Volcafe and the USDA.
• Consider the potential margin pressures on coffee-reliant consumer companies such as Starbucks, Hershey, and Mondelez stemming from possible US tariff implementations and input cost volatility, warranting a cautious stance until greater clarity on supply dynamics and trade policies emerges.