Arabica Coffee Falls in Expectations of Larger Brazil Coffee Exports

December arabica coffee (KCZ26) closed down -4.20 (-1.48%) on Wednesday, and January ICE robusta coffee (RMF27) closed up +18 (+0.56%).

Coffee prices settled mixed on Wednesday, with arabica falling to a 5-week low.  Coffee prices recovered from their worst level on Wednesday, with robusta moving into positive territory after short covering emerged when the dollar index ($DXY) fell to a 5-week low. 

Expectations that coffee exports out of Brazil will increase are weighing on prices after ICE reported that 55,396 bags of Brazilian coffee were awaiting grading at ICE warehouses as of Tuesday, the most in 7 weeks.  As coffee passes grading tests, ICE will add it to the certified warehouse inventory figures, but grading can take 1-2 weeks or longer if volume is high. Coffee has been arriving rapidly from Brazil since mid-September, with ICE inventories of Brazilian coffee rising to a 9-month high of 83,052 bags last Thursday and Friday.

Coffee prices were already on the defensive after the Brazilian real (^USDBRL) fell to a 10.25-month low against the dollar last Monday.  The real is under pressure following President Luiz Inacio Lula da Silva’s surprise victory in last week’s Brazilian presidential election.  A weaker Brazilian real encourages exporters to sell more coffee, as they can get a higher dollar price for their sales. Brazil is the world’s largest coffee producer and exporter by a substantial margin, accounting for 35-40% of world production and nearly 30% of world coffee exports, according to the ICO and USDA.

News of higher coffee exports from Vietnam, the world’s largest producer of robusta coffee, is negative for robusta coffee prices.  Vietnam's National Statistics Office reported Tuesday that Vietnam's Oct coffee exports rose +61% y/y to 114,000 MT and 2026 coffee exports (Jan-Oct) rose by +18.8% y/y to 1.57 MMT.  Vietnam's 2025 coffee exports jumped by +17.5% y/y to 1.58 MMT.  Also, Vietnam's 2025/26 coffee production is projected to rise +6% y/y to a 4-year high of 1.76 MMT (29.4 million bags).

Tight coffee inventories may limit additional downside in coffee prices in the near term.  ICE arabica inventories fell to a 7-week low of 220,379 bags on Tuesday, only modestly above the 27-year low of 217,646 bags posted on September 15.  While Brazilian coffee has been arriving at ICE warehouses, it has not yet appeared in significant amounts in ICE-certified stocks.  Meanwhile, ICE robusta inventories have risen sharply since early October and posted a 1.25-year high of 6,809 lots last Thursday, backing off to 6,716 lots on Wednesday.

Somar Meteorologia reported last Monday that 29.6 mm of rain, or 82% of the historical average, fell in Brazil's Minas Gerais, the country's main arabica-coffee growing region, in the week ended October 25. 

Favorable growing conditions in Brazil and Vietnam are bearish for coffee prices.  Above-normal rainfall in Brazil during the now-critical flowering stage may boost next year’s 2026/27 coffee harvest, a bearish factor for prices.  In Vietnam, forecaster Vaisala said recent abundant rains have improved soil moisture levels and should aid cherry development in Vietnam’s Central Highlands, the country’s largest coffee-producing region. 

However, coffee prices have underlying support from concerns that the super-El Niño weather pattern could hurt next year’s Brazilian and Vietnamese coffee crops.  Vietnam’s Agriculture Ministry said on October 16 that Vietnam’s Central Highlands, the country’s largest coffee-growing region, could face an El Niño-triggered drought later this year and early 2027.

Larger coffee supplies from Brazil are bearish for prices.  On October 6, Brazil’s Trade Ministry reported that Brazil’s Sep coffee exports jumped more than +20% y/y to 236,000 MT.  On September 24, Conab, Brazil’s crop forecasting agency, raised its 2026 Brazil coffee production estimate to 67.6 million bags from 66.7 million bags.  Brazil’s 2026 arabica coffee production is expected to rise +34.8% y/y to 48.21 million bags, while robusta production is expected to fall -6.6% y/y to 19.39 million bags. 

On October 9, Colombia’s Coffee Federation reported that 2025/26 Colombia coffee production (Oct-Sep) fell -15% y/y to 12.65 million bags, and Colombia’s 2025/26 coffee exports fell -12% y/y to 11.78 million bags.  Colombia is the world’s second-largest arabica producer. 

Adding to bearish pressure on coffee prices, the International Coffee Organization (ICO) projected a record global coffee crop and a surplus on September 10.  ICO said 2025/26 global coffee production rose +4.4% y/y to a record 183.6 million bags and consumption fell -0.9% y/y to 180.6 million bags, leaving the global coffee market with a 3 million bag surplus, the first surplus in five years.

The latest USDA biannual forecast was bearish for coffee prices.  On July 22, the USDA forecast that global coffee output in the 2026-27 season will rise by +6.0% (10.8 million bags) to a record 189.7 million bags, mainly due to improved growing conditions in Brazil.  The USDA expects global arabica production to rise +12% y/y, although robusta production is expected to fall by -0.7% y/y.  World ending stocks are expected to rise +1.9 million bags to 26.3 million bags.  On June 3, the USDA's Foreign Agricultural Service (FAS) forecast a record 2026/27 Brazil coffee crop of 71.9 million bags, up +14% y/y.

On the date of publication, Rich Asplund did not directly have a position in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.