Coffee prices have rebounded sharply, with December arabica climbing around 3.64% and November robusta gaining approximately 1.34% as concerns over Brazil’s next crop trigger fund short covering. Arabica has moved to a two-week high, while robusta has reached a one-week high as traders reassess the weather outlook during a critical stage of Brazil’s coffee production cycle.
The immediate focus is on Brazilian flowering conditions. Dry weather concerns have emerged across Minas Gerais, the country’s largest arabica-producing region, with limited rainfall expected over the coming week. The timing is important because flowering is critical for determining the potential size of the 2026/27 crop.
However, the broader supply picture remains bearish. The International Coffee Organization expects a record global 2025/26 crop and a three-million-bag surplus, while the USDA is forecasting another record global crop for 2026/27.
Coffee is therefore caught between near-term weather risk and historically large future supply expectations. The next significant price move will depend on whether concerns over Brazilian flowering develop into a genuine production threat or whether improving supply fundamentals regain control.
Market Snapshot
| Factor | Current Situation | Potential Market Impact |
|---|---|---|
| December Arabica | Up around 3.64% | Strong short-covering rally |
| November Robusta | Up around 1.34% | Higher on weather and supply concerns |
| Brazil 2026 Crop Estimate | 67.6 million bags | Large production outlook remains bearish |
| Brazil Arabica | 48.21 million bags expected | Strong increase in arabica supply |
| Global 2025/26 Crop | Record 183.6 million bags | Creates surplus pressure |
| Global 2025/26 Balance | Around 3 million-bag surplus | Limits sustained upside potential |
| Brazil Weather | Dryness concerns during flowering | Creates 2026/27 crop risk |
| Vietnam Weather | Improved rainfall and soil moisture | Supports robusta production |
| Arabica Inventories | Around 253,203 bags | Still historically low |
| Robusta Inventories | Around 5,398 lots | Near a 10-month high |
| El Niño | Increasing weather uncertainty | Potential medium-term production risk |
Current Coffee Price Action
Coffee prices have recovered strongly after spending much of the past month under pressure.
December arabica has reached a two-week high, while robusta has climbed to a one-week high as traders respond to the possibility that dry weather could affect Brazil’s next harvest.
The rally also reflects short covering after the market recently reached multi-month lows.
This is important because the current move does not necessarily indicate that the broader supply outlook has fundamentally changed.
Instead, traders are reassessing the immediate weather risk while global production forecasts remain historically large.
The sustainability of the rally will therefore depend on whether the Brazilian weather outlook deteriorates further.
Brazil Flowering Conditions Become the Immediate Price Driver
Brazil’s 2026/27 coffee crop is entering an important developmental stage, making rainfall particularly significant.
Minas Gerais is the country’s largest arabica-producing region, and forecasts currently indicate limited rainfall over the coming week.
Dry conditions during flowering can affect the development of coffee cherries and ultimately reduce yield potential if moisture stress becomes sufficiently severe.
This has encouraged traders to reduce bearish positions and increase attention on weather forecasts.
The key question is whether the current dryness is temporary or represents the beginning of a more persistent moisture deficit.
Brazil Production Outlook Remains Large
Despite the latest weather concerns, Brazil continues to have a substantial production outlook.
Conab has raised its 2026 coffee production estimate to approximately 67.6 million bags, compared with its previous estimate of 66.7 million bags.
Arabica production is expected to reach around 48.21 million bags, representing an increase of approximately 34.8% year over year.
Robusta production, however, is expected to decline around 6.6% to approximately 19.39 million bags.
The large increase in arabica production is particularly important because it provides significant additional supply potential for the world’s largest arabica-producing country.
Brazil Exports Are Adding to Current Global Supply
Brazil’s harvest is progressing toward completion, and the resulting export flow is adding physical coffee to international markets.
Brazil exported approximately 4.155 million bags in August, a record for the month and around 31% above the previous year.
Arabica exports increased approximately 26%, while robusta shipments increased about 54%.
The increase demonstrates that the current physical supply situation remains comfortable despite the recent price rally.
As more Brazilian coffee reaches international buyers, futures markets face competition from readily available physical supply.
Vietnam Provides Additional Robusta Supply
Vietnam’s production outlook is also weighing on robusta prices.
The world’s largest robusta producer has benefited from improved rainfall, with better soil moisture supporting cherry development in the Central Highlands.
Vietnamese coffee exports increased approximately 13.7% during January-August, reaching around 1.33 million metric tons.
The country’s 2025/26 production is also expected to increase around 6% to approximately 1.76 million metric tons, representing a four-year high.
The combination of stronger Vietnamese exports and improved growing conditions creates a significant supply headwind for robusta.
Arabica and Robusta Inventories Are Sending Different Signals
Inventory data is highlighting an important divergence between the two markets.
ICE arabica inventories have recovered from their recent 27-year low of 217,646 bags, but remain relatively tight at around 253,203 bags.
Low arabica inventories provide an important underlying source of support because nearby physical availability remains limited.
Robusta inventories tell a different story.
ICE robusta stocks have climbed to approximately 5,398 lots, their highest level in around ten months.
This creates a more bearish inventory backdrop for robusta compared with arabica.
The difference could become increasingly important if arabica supply remains constrained while robusta availability continues improving.
Global Coffee Supply Forecasts Remain Bearish
The larger global supply outlook remains a major obstacle to sustained price gains.
The International Coffee Organization expects 2025/26 global coffee production to reach approximately 183.6 million bags, a record level and an increase of around 4.4%.
Consumption is forecast at approximately 180.6 million bags, leaving the market with a surplus of around 3 million bags.
The USDA is even more bullish on future production, forecasting 2026/27 global output at approximately 189.7 million bags, an increase of around 6% and another record.
World ending stocks are also expected to increase.
This means coffee would need a meaningful deterioration in production expectations to overcome the broader surplus narrative.
El Niño Creates a Longer-Term Weather Risk
The developing El Niño pattern introduces another variable into the 2026/27 production outlook.
El Niño can disrupt normal rainfall patterns across major coffee-producing regions, potentially creating drought, excessive rainfall or temperature extremes.
For Brazil, the immediate concern is whether rainfall becomes insufficient during flowering.
For Asia, changing rainfall patterns could also affect production in Vietnam and other producing countries.
The weather risk therefore extends beyond Brazil, although the country’s enormous role in global arabica supply makes Brazilian conditions particularly important.
Bullish Sentiment
- Dry conditions in Minas Gerais are raising concerns about Brazilian flowering and the 2026/27 crop.
- Arabica inventories remain historically low, despite their recent recovery.
- El Niño creates additional weather uncertainty across South America and Asia.
- Brazilian arabica production is highly sensitive to flowering conditions, making near-term weather particularly important.
- Fund short covering can accelerate rallies when weather concerns emerge after a prolonged decline.
Bearish Sentiment
- Global coffee production is forecast at record levels, limiting the potential for a sustained supply shortage.
- The ICO expects a 3 million-bag surplus for the 2025/26 season.
- USDA forecasts another record global crop in 2026/27, with output approaching 190 million bags.
- Brazilian coffee exports are exceptionally strong, adding physical supply to international markets.
- Vietnamese production and exports are increasing, particularly supporting robusta availability.
- Robusta inventories have climbed to a 10-month high, creating additional pressure on that market.
Price Forecast: What Traders Are Watching
The current rally is primarily a weather-driven reaction rather than confirmation that the global coffee market has moved into structural shortage.
The key issue is whether dry conditions in Brazil persist through the flowering period.
If rainfall remains limited and crop conditions deteriorate, traders could continue reducing short positions and increase risk premiums for the 2026/27 Brazilian crop.
If rainfall improves and flowering develops normally, the market is likely to refocus on the record production forecasts and expanding global supply.
Arabica’s historically low inventories provide an additional source of support, meaning the market could remain more sensitive to supply disruptions than the headline global surplus suggests.
The most important signals will therefore be Brazilian rainfall, flowering progress, crop estimates, export volumes and ICE inventories.
Supply Outlook
Near-term coffee supply remains substantial.
Brazil’s harvest is providing significant export volumes, while Vietnam is also contributing stronger robusta availability.
The medium-term supply outlook is more uncertain because Brazil’s next crop is still at a sensitive stage of development.
The current production estimates remain large, but they can change materially if weather conditions deteriorate during flowering and cherry development.
The supply outlook therefore depends increasingly on whether the current Brazilian weather concern develops into a measurable reduction in crop potential.
Demand Outlook
Demand remains important but is currently being overshadowed by production expectations.
The projected global surplus indicates that production is expected to exceed consumption during the current season.
However, lower prices can encourage additional buying, while sustained growth in coffee consumption can gradually absorb additional supply.
If the market begins to see evidence of stronger consumption alongside declining arabica inventories, the current surplus narrative could become less influential.
For now, traders remain more focused on production and weather than on a major change in global consumption.
Market Outlook for the Coming Sessions
Coffee prices are likely to remain highly sensitive to weather forecasts as Brazil’s flowering period develops.
The immediate bullish catalyst would be continued dryness across Minas Gerais or evidence that moisture stress is affecting flowering and early crop development.
The main bearish catalyst would be a return of beneficial rainfall, allowing traders to refocus on Brazil’s large production forecast and the broader global surplus.
Arabica and robusta are also likely to continue displaying different fundamentals. Historically low arabica inventories provide underlying support, while rising robusta stocks and stronger Vietnamese supply create greater downside pressure in that market.
The coming sessions will therefore centre on Brazilian rainfall, flowering conditions, Vietnam’s crop outlook, global inventories and updated production estimates.
Currency Hedger View
Coffee highlights the close relationship between commodity prices, agricultural supply and foreign exchange markets.
Coffee is predominantly traded in US dollars, meaning movements in the dollar can affect the effective cost for international buyers and influence the competitiveness of producing countries.
For coffee importers, roasters, manufacturers and international traders, the combination of volatile coffee prices and USD exchange-rate movements can materially affect purchasing costs and margins.
Brazil and Vietnam are also major coffee exporters, making currency movements particularly relevant when assessing the competitiveness of their exports and the local-currency value of international coffee revenues.
Currency Hedger helps businesses and individuals manage international currency requirements while understanding the wider market forces influencing exchange rates.
Analysis Louis Roche – Today Markets
Coffee is currently balancing a powerful short-term weather catalyst against a much larger global supply story.
The immediate rally reflects concerns that dry conditions in Brazil could threaten flowering and reduce the potential size of the 2026/27 crop. Historically low arabica inventories provide additional support and leave the market sensitive to any deterioration in physical availability.
However, the broader supply outlook remains substantial. Brazil is producing and exporting large volumes, Vietnam’s robusta supply is improving, and both the ICO and USDA are forecasting historically large global production.
The next phase of the market will therefore depend heavily on Brazilian weather.
If rainfall remains insufficient through the critical flowering period, the market could continue pricing additional production risk. If conditions improve, attention is likely to return to record global production and surplus expectations.
For traders, the central question is whether the current weather threat becomes a genuine crop problem or remains a temporary interruption within an otherwise well-supplied global coffee market.
Louis Roche – Today Markets
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