Coffee prices are showing modest strength as short covering, currency movements and emerging concerns over Brazil’s 2026/27 crop provide support. Robusta has been particularly firm, reaching a five-week high as speculative positioning becomes increasingly short.

However, the broader fundamental picture remains mixed. Global production is expected to reach record levels, Brazil’s 2026 crop estimates have been raised, and Vietnamese supplies are increasing. At the same time, dry conditions during Brazil’s critical flowering period and historically low arabica inventories provide important upside risks.

Market Snapshot

Market	Latest Level	Change
December 2026 Arabica Coffee	—	+0.50 (+0.21%)
November 2026 Robusta Coffee	—	+21 (+0.61%)
Robusta Managed-Money Position	3,959 net short	13-month high
ICE Arabica Inventories	260,054 bags	8-week high
ICE Robusta Inventories	5,398 lots	10-month high
2025/26 Global Production	183.6M bags	Record
2026/27 USDA Production Forecast	189.7M bags	Record

Coffee Market Firms as Short Covering Emerges

Coffee prices are currently finding some support after a prolonged period of weakness.

Robusta futures have reached a five-week high, with a weaker US dollar encouraging short covering across the coffee market.

The positioning picture is particularly important for robusta. Managed-money funds increased their net-short position by approximately 2,658 contracts during the latest reporting period, taking total net shorts to 3,959 contracts, the largest short position in around 13 months.

Such positioning can increase the potential for a short-covering rally if prices continue to move higher.

Brazil Weather Becomes Increasingly Important

Brazil’s weather is becoming a key factor for the 2026/27 crop.

Arabica coffee trees are currently entering an important flowering stage, making rainfall and soil moisture particularly significant for future production.

Forecasts for limited rainfall in Minas Gerais, Brazil’s largest arabica-producing region, have raised concerns about crop development.

An extended period of dry weather during flowering could reduce flowering success and ultimately affect the size of the 2026/27 crop.

The potential influence of El Niño adds another layer of uncertainty, with the weather pattern capable of producing irregular rainfall and temperature conditions across key coffee-producing regions.

El Niño Creates Longer-Term Production Risk

The potential strength of the developing El Niño pattern remains a medium-term concern for coffee producers.

The US Climate Prediction Center has indicated that the event could become one of the strongest El Niño patterns in more than 75 years.

For coffee markets, the key concern is the potential disruption to rainfall during critical production periods in Brazil and other producing regions.

If rainfall becomes insufficient during flowering and early fruit development, crop estimates could eventually be revised lower.

However, the market still requires confirmation from actual weather conditions before translating the risk into a significant production reduction.

Brazil Production Outlook Remains Large

The immediate Brazilian supply outlook remains bearish.

Brazil’s crop forecasting agency Conab has raised its 2026 coffee production estimate to approximately 67.6 million bags, from 66.7 million previously.

Arabica production is expected to increase approximately 34.8% year-on-year to 48.21 million bags, while robusta production is projected to decline approximately 6.6% to 19.39 million bags.

The large increase in arabica production is an important reason why global supply expectations remain elevated.

Brazil Exports Add Physical Supply

Brazilian coffee continues to move into international markets as the harvest season approaches completion.

Brazilian coffee exports reached a record 4.155 million bags in August, up approximately 31% year-on-year.

Arabica exports increased around 26% to 2.87 million bags, while robusta exports climbed approximately 54% to 953,592 bags.

Separate trade data also showed August coffee exports rising approximately 44.6% year-on-year, reaching the highest level in eight months.

The strong export flow is adding physical availability to international markets and remains a significant counterweight to weather-related bullish expectations.

Vietnam Supply Remains Strong

Vietnam is also contributing to the global supply picture.

Vietnamese coffee exports during January through August increased approximately 13.7% year-on-year to 1.33 million metric tons.

Full-year 2025 exports increased approximately 17.5% to 1.58 million tons.

Vietnam’s 2025/26 coffee production is projected to rise approximately 6% to 1.76 million metric tons, which would represent a four-year high.

Improved rainfall in the Central Highlands is also supporting soil moisture and cherry development.

This is particularly relevant for robusta because Vietnam is the world’s largest robusta producer.

Global Coffee Supply Remains a Major Headwind

The broader global balance remains a bearish consideration.

The International Coffee Organization estimates that 2025/26 global production increased approximately 4.4% year-on-year to a record 183.6 million bags.

Consumption is estimated to have declined approximately 0.9% to 180.6 million bags, creating a global surplus of around 3 million bags.

This would represent the first global coffee surplus in five years.

The USDA’s 2026/27 forecast is even larger, with global production projected to increase approximately 6% to a record 189.7 million bags.

World ending stocks are expected to increase by approximately 1.9 million bags to 26.3 million bags.

Arabica Inventories Provide Support

Despite the large global production outlook, arabica inventories remain an important supportive factor.

ICE arabica stocks recently fell to approximately 217,646 bags, the lowest level in 27 years.

Inventories have since recovered to around 260,054 bags, an eight-week high, but remain relatively low from a historical perspective.

The inventory situation therefore provides a potential buffer against excessive downside pressure in arabica, particularly if crop concerns begin to intensify.

Robusta Inventories Remain Elevated

Robusta presents a different inventory picture.

ICE robusta inventories have increased to approximately 5,398 lots, the highest level in around ten months.

The combination of rising Vietnamese exports, higher global production expectations and increasing exchange stocks continues to create pressure on the robusta supply outlook.

However, the substantial managed-money short position provides an important source of potential short-term upside volatility.

Bullish Scenario

The bullish scenario would develop if weather concerns begin translating into lower production expectations.

Potential supportive factors include:

• Dry conditions during Brazil’s flowering period.
• A stronger-than-expected El Niño impact.
• Lower Brazilian 2026/27 crop estimates.
• Deteriorating conditions in Minas Gerais.
• Continued historically low arabica inventories.
• Further short covering in robusta.
• Strong global consumption.
• A weaker US dollar.

Under this scenario, the market could begin to price a tighter supply balance despite the current record-production forecasts.

Bearish Scenario

The bearish scenario remains centred on abundant global supply.

Brazil’s large crop and strong export flows are increasing physical availability, while Vietnam is also reporting stronger exports and improved growing conditions.

The global surplus projected for 2025/26 and record production forecast for 2026/27 provide a significant fundamental headwind.

Higher ICE robusta inventories and recovering arabica stocks could reinforce the bearish outlook if weather risks fail to develop into measurable production losses.

Coffee Price Outlook

The coffee market is currently being driven by a conflict between strong supply expectations and emerging weather risks.

Near-term price action can remain supported by short covering, particularly in robusta, where managed-money positioning has become heavily short.

The larger question is whether weather conditions in Brazil will materially alter the 2026/27 production outlook.

For now, the market has substantial projected supply ahead, but any deterioration during the flowering period could quickly change expectations.

Supply Outlook

Global coffee supply is expected to remain large.

Brazil’s 2026 production estimate has been raised, while the USDA expects global 2026/27 production to reach a record 189.7 million bags.

Vietnam is also contributing additional robusta supply through higher exports and improved growing conditions.

However, the forward supply outlook remains vulnerable to weather. Brazil’s flowering period represents an important point of focus, particularly if El Niño produces prolonged dryness or abnormal temperatures.

Demand Outlook

Demand signals remain broadly constructive but need to be monitored against the large projected production increase.

The ICO estimates consumption declined in 2025/26, contributing to a global surplus.

If consumption fails to accelerate while production continues to rise, the market could remain well supplied.

Conversely, stronger consumption combined with production disruptions would reduce the projected surplus and provide a more supportive environment for prices.

Louis Roche Analysis

Coffee is currently presenting two very different fundamental stories.

The first is the large global supply story. Brazil is producing a substantial crop, exports are moving at strong levels and Vietnam is also contributing increased robusta supplies. The USDA is forecasting another record global production level for 2026/27.

The second is the forward weather risk.

Brazil’s next crop is entering an important flowering period, and rainfall conditions during this stage can have a meaningful influence on eventual production. If El Niño produces persistent dryness across key growing regions, the market could begin revising production expectations lower.

The positioning structure adds another dimension. Robustas have accumulated a significant managed-money net-short position, creating the potential for short covering if weather or currency developments push prices higher.

Arabica inventories also deserve attention. Although stocks have recovered from their recent 27-year low, they remain a fundamentally important source of support if physical availability tightens.

In my view, the market is likely to remain highly sensitive to Brazilian weather over the coming weeks. The current supply picture argues for caution on the upside, but the combination of flowering-stage weather risk, low historical arabica inventories and heavy robusta short positioning means that price volatility could remain elevated.

The key transition to watch is whether the market moves from record-supply expectations toward evidence of production risk.

Coming Sessions

The coffee market will focus on:

• Brazilian rainfall across Minas Gerais.
• Flowering progress for the 2026/27 crop.
• El Niño developments.
• Conab production estimates.
• Brazilian export volumes.
• Vietnamese export activity.
• ICE arabica inventories.
• ICE robusta inventories.
• Managed-money positioning.
• Global consumption and coffee demand.
• US dollar movements.

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Market analysis prepared for Today Markets. For informational purposes only and not intended as investment, trading, financial or commodity advice.