September arabica coffee (KCU25) on Monday closed up +4.15 (+1.39%), and September ICE robusta coffee (RMU25) closed up +130 (+4.03%).
Coffee prices settled sharply higher Monday due to adverse weather conditions in Brazil and concerns about tariffs. On Monday, Sucden Financial Ltd said that a severe hailstorm in the Minas Gerais region may have damaged some of Brazil’s coffee crops. The markets are also concerned about the threat of a 50% tariff on Brazilian goods if Brazil does not reach a trade deal with the US by Friday, which could potentially raise coffee prices sharply and disrupt supplies from Brazil, the world’s largest producer of arabica coffee.
An excessive short position by funds in robusta coffee could exacerbate any short-covering rally in robusta coffee futures. ICE Futures Europe reported last Friday that funds boosted their net-short positions in ICE robusta futures by 3,334 to 4,628 short positions in the week ended July 22, the most in two years.
Brazil coffee harvest pressures are bearish for prices. Last Tuesday, arabica fell to a 2-week low, Sep robusta slid to a contract low, and nearest-futures (N25) robusta sank to a 1.25-year low. Last Friday, Safras & Mercado reported that Brazil’s overall 2025/26 coffee harvest was 84% complete as of July 23, ahead of the comparable level of 81% last year and the 5-year average of 77%. The breakdown showed that 96% of the robusta harvest and 76% of the arabica harvest were complete as of July 23. In related news, Brazil’s Cooxupe coffee co-op announced last Tuesday that its harvest among its members was 59% complete as of July 18. Cooxupe is Brazil’s largest coffee cooperative and Brazil’s largest exporter group.
On the bearish side for robusta is an increase in ICE-monitored inventories. Robusta coffee inventories rose to a 1-year high of 7,029 lots Monday. Conversely, ICE-monitored arabica coffee inventories fell to a 3.25-month low of 800,326 bags Monday.
Recent rain in Brazil has eased dryness concerns and is bearish for coffee prices. Somar Meteorologia reported Monday that Brazil’s largest arabica coffee-growing area, Minas Gerais, received 3.5 mm of rain during the week ended July 26, more than +200% of the historical average.
Smaller coffee exports from Brazil are positive for prices after Cecafe reported on July 16 that Brazil’s total Jun green coffee exports fell -31% y/y to 2.3 million bags, with arabica exports down -27% y/y to 1.8 million bags and robusta exports down -42% y/y to 476,334 bags.
Coffee prices have retreated over the past three months on the outlook for abundant coffee supplies. On June 25, the USDA’s Foreign Agricultural Service (FAS) forecasted that Brazil’s 2025/26 coffee production will increase by +0.5% y/y to 65 million bags and that Vietnam’s 2025/26 coffee output will rise by 6.9% y/y to a 4-year high of 31 million bags. Brazil is the world’s largest producer of arabica coffee, and Vietnam is the world’s largest producer of robusta coffee.
Due to drought, Vietnam’s coffee production in the 2023/24 crop year decreased by -20% y/y to 1.472 MMT, the smallest crop in four years. Also, Vietnam’s General Statistics Office reported that 2024 Vietnam coffee exports fell by -17.1% y/y to 1.35 MMT. Additionally, the Vietnam Coffee and Cocoa Association reduced its 2024/25 Vietnam coffee production estimate to 26.5 million bags on March 12, down from a December estimate of 28 million bags. By contrast, the Vietnam National Statistics Office reported on July 7 that Vietnam’s Jan-Jun 2025 coffee exports were up +4.1% y/y to 943,000 MT.
The USDA’s biannual report, released on June 25, was bearish for coffee prices. The USDA’s Foreign Agriculture Service (FAS) projected that world coffee production in 2025/26 will increase by +2.5% y/y to a record 178.68 million bags, with a -1.7% decrease in arabica production to 97.022 million bags and a +7.9% increase in robusta production to 81.658 million bags. The USDA’s FAS forecasts that 2025/26 ending stocks will climb by +4.9% to 22.819 million bags from 21.752 million bags in 2024/25.
For the 2025/26 marketing year, Volcafe projects a global 2025/26 arabica coffee deficit of -8.5 million bags, wider than the -5.5 million bag deficit for 2024/25 and the fifth consecutive year of deficits.
