Coffee prices are recovering from recent lows as a weaker US dollar encourages fund short covering, while traders continue to assess the impact of expanding global production. December arabica coffee rose 3.25 cents to 278.40 cents per pound, while November robusta gained 77 points to $3,369 per tonne.
Arabica reached a one-week high as the softer dollar improved the appeal of dollar-denominated commodities. However, the broader coffee market remains under pressure after both contracts recently reached multi-month lows amid expectations for abundant global supplies.
The fundamental picture remains mixed. Brazil is producing more coffee, Vietnam’s exports are increasing and global production is expected to reach record levels. Against this, arabica inventories remain historically low and weather risks surrounding Brazil’s next crop could provide support if conditions deteriorate.
Market Snapshot
| Factor | Current Market Signal |
|---|---|
| December Arabica | 278.40 cents/lb |
| November Robusta | $3,369/tonne |
| Short-Term Trend | Recovering |
| Global 2025/26 Balance | Approximately 3M-bag surplus |
| 2026/27 Global Production | Record expected |
| Brazil 2026 Production | 67.6M bags |
| Brazil Arabica Production | 48.21M bags |
| Vietnam Production | Higher |
| Arabica ICE Stocks | 258,415 bags |
| Robusta ICE Stocks | 5,398 lots |
| US Dollar | Weaker, supportive |
| Weather Risk | Increasing importance |
Current Coffee Price Action
Coffee is attempting to recover after a four-week decline that pushed prices to approximately three-month lows.
The latest rebound has been driven partly by currency markets. A weaker US dollar reduces the dollar cost of coffee for international buyers and can encourage short covering among speculative traders.
However, the broader trend remains constrained by expectations for a substantial increase in global production.
The market is therefore entering an important period in which improving supply availability must be balanced against historically low arabica inventories and uncertainty surrounding the next Brazilian crop.
Global Supply Outlook Remains Bearish
The International Coffee Organization expects the 2025/26 global coffee crop to reach a record 183.6 million bags, up 4.4% year over year.
At the same time, global consumption is projected to fall 0.9% to 180.6 million bags.
That combination produces an estimated 3 million-bag surplus, representing the first global coffee surplus in five years.
The balance is important because it marks a major change from the tight conditions that supported coffee prices during previous seasons.
If production continues to expand faster than consumption, the market could remain under pressure even if short-term weather or currency developments generate temporary rallies.
Brazil Production Expands
Brazil remains the dominant factor in the global arabica market.
Brazil’s crop forecasting agency has raised its 2026 production estimate to 67.6 million bags, from a previous estimate of 66.7 million.
Arabica production is expected to rise approximately 34.8% year over year to 48.21 million bags, while robusta production is expected to decline 6.6% to 19.39 million bags.
The significant increase in arabica production is particularly important for NY futures because Brazil is the world’s largest arabica producer.
Higher output could improve availability throughout the international supply chain and place additional pressure on prices if exports remain strong.
Brazil’s Next Crop Enters a Critical Weather Period
The outlook for the next Brazilian crop remains an important source of uncertainty.
Above-normal rainfall in Minas Gerais during the critical flowering period could improve crop prospects. Approximately 33.4 mm of rain fell during the week through September 20, equivalent to around 242% of the historical average.
Good moisture conditions generally support flowering and cherry development, creating a bearish factor for prices if the favourable conditions continue.
However, the weather picture can change quickly. Any significant delay in rainfall, excessive moisture or extreme temperatures during flowering could reduce the potential size of the next crop.
Brazilian Exports Add to Global Availability
Brazilian exports are providing another source of near-term supply pressure.
Total coffee exports reached approximately 4.155 million bags in August, up 31% year over year and representing a record August.
Arabica exports increased around 26% to 2.87 million bags, while robusta exports jumped 54% to 953,592 bags.
The increase in exports comes as Brazil’s harvest moves toward completion, allowing a larger volume of coffee to reach international markets.
If this export pace continues, it could keep pressure on futures despite the historically low arabica inventory position.
Vietnam Supplies More Robusta
Vietnam is adding further pressure to the robusta market.
Vietnamese coffee exports during January-August increased approximately 13.7% year over year to 1.33 MMT.
Production for the 2025/26 season is expected to rise approximately 6% to 1.76 MMT, equivalent to around 29.4 million bags.
As the world’s largest robusta producer, Vietnam’s improving supply position is particularly important for London robusta futures.
Higher exports and improved soil moisture in the Central Highlands could keep robusta availability elevated in the coming months.
Arabica and Robusta Inventories Diverge
Coffee inventories are sending different signals across the two markets.
ICE arabica stocks recently fell to only 217,646 bags, the lowest level in approximately 27 years, before recovering to 258,415 bags.
The extremely low stock level remains a structural source of support for arabica prices.
Robusta inventories tell a different story. ICE robusta stocks have climbed to approximately 5,398 lots, a ten-month high.
This divergence helps explain why arabica has a stronger underlying inventory argument while robusta faces greater pressure from expanding supply.
El Niño Creates a Forward Weather Risk
Weather remains one of the largest potential upside risks for coffee.
A strong El Niño pattern could disrupt rainfall across Brazil and other major producing regions.
In Brazil, concerns centre on the possibility that El Niño could delay September and October rainfall during the flowering period for the 2026/27 crop.
If flowering is disrupted, production expectations could be reduced and the current record-supply narrative would weaken.
The potential impact is therefore not yet a confirmed supply loss, but it remains an important risk traders will monitor as the crop develops.
Bullish Sentiment
1. Historically Low Arabica Inventories
ICE arabica stocks remain extremely low despite their recent recovery, providing an important underlying support factor.
2. Weaker US Dollar
A softer dollar can improve the purchasing power of international coffee buyers and encourage short covering.
3. Brazil Weather Risk
Any deterioration in rainfall during the critical flowering period could reduce the next crop’s potential.
4. El Niño Threat
A strong El Niño could disrupt rainfall and temperatures across major coffee-producing regions.
5. Strong Global Consumption Potential
Although the current global balance is expected to show a surplus, continued demand growth could absorb some of the additional production.
6. Supply Concentration
Brazil and Vietnam remain critical to global coffee availability, meaning weather disruptions in either country could have an outsized impact on prices.
Bearish Sentiment
1. Record Global Production
The ICO expects 2025/26 production to reach a record 183.6 million bags.
2. Global Surplus
The market is projected to have a surplus of approximately 3 million bags, the first surplus in five years.
3. Larger Brazilian Crop
Brazil’s 2026 production estimate has been raised to 67.6 million bags, with arabica production expected to increase sharply.
4. Strong Brazilian Exports
August exports reached a record for the month and were 31% above the previous year.
5. Rising Vietnamese Supply
Higher Vietnamese exports and production are increasing global robusta availability.
6. Rising Robusta Inventories
ICE robusta stocks have reached a ten-month high.
7. Record 2026/27 Global Production Forecast
USDA expects global coffee production to increase approximately 6% to a record 189.7 million bags in 2026/27.
Price Forecast: What Traders Are Watching
Coffee’s recent rebound is being supported by the weaker dollar and short covering, but the market still faces a substantial supply challenge.
The key question is whether historically low arabica inventories and emerging weather risks can offset the expected increase in global production.
A sustained recovery would require evidence that the supply outlook is deteriorating or that demand is strong enough to absorb the additional coffee.
Conversely, continued favourable weather in Brazil and Vietnam, strong exports and rising inventories could bring renewed selling pressure once short-covering activity fades.
The next major directional move is likely to depend on the interaction between Brazilian crop conditions, global inventory levels, the US dollar and evidence of demand growth.
Supply Outlook
Near-term supply is expanding as Brazil completes its harvest and exports increase.
Vietnam is also contributing greater robusta availability, while favourable growing conditions are improving prospects for future production.
Looking further ahead, the USDA expects global 2026/27 production to rise to approximately 189.7 million bags, with Brazilian output forecast at a record 71.9 million bags.
This represents a substantial supply cushion if the forecasts are realised.
The main threat to that outlook is weather. A significant disruption to Brazil’s flowering period or adverse conditions across Asia and South America could result in production estimates being revised lower.
Demand Outlook
Demand remains the less supportive side of the market balance.
The ICO expects 2025/26 consumption to decline approximately 0.9% to 180.6 million bags, leaving production above consumption.
For prices to sustain a stronger recovery, demand would need to accelerate or supply growth would need to slow.
Low arabica inventories provide evidence that some parts of the physical market remain tight, but rising production and exports could gradually rebuild availability if consumption does not keep pace.
Market Outlook for the Coming Sessions
Coffee prices are likely to remain highly sensitive to the US dollar and Brazilian weather as the market moves through a critical period for the next crop.
The recent recovery demonstrates how quickly prices can respond to currency movements and short covering, but the larger supply outlook remains a significant constraint.
Arabica has an important source of support from historically low inventories, while robusta faces greater pressure from rising Vietnamese supply and higher exchange stocks.
The coming sessions will therefore centre on whether tight arabica inventories and weather risk can outweigh the broader record-production outlook.
Currency Hedger View
Coffee is priced internationally in US dollars, making currency movements an important component of the effective cost for importers, roasters, traders and producers.
The recent price recovery also demonstrates this relationship directly: a weaker dollar helped trigger short covering and supported coffee futures.
For businesses exposed to coffee purchases or sales, movements in the US dollar, Brazilian real, Vietnamese dong and other relevant currencies can materially change margins even when the underlying coffee price is unchanged.
A Currency Hedger account provides access to international currency exchange and payment solutions while helping businesses understand the broader market forces influencing their currency exposure.
Analysis Louis Roche – Today Markets
Coffee is entering a period where record global supply expectations are competing with exceptionally low arabica inventories and increasing weather uncertainty.
The recent rebound has been supported by a weaker dollar and short covering, but the broader fundamental picture remains heavily dependent on Brazil.
If favourable rainfall continues through the flowering period and Brazil delivers another large crop, the global supply surplus could keep prices under pressure. If El Niño disrupts rainfall or flowering, the market could quickly reassess the size of the 2026/27 crop.
For now, the key distinction is between abundant expected production and tight existing arabica inventories. That divergence is likely to keep coffee prices volatile as traders assess whether future supply can rebuild stocks sufficiently.
Louis Roche – Today Markets
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