Coffee Prices Erase Early Gains as the Brazilian Real Tumbles

December arabica coffee (KCZ26) is down -1.65 (-0.59%) today, and January ICE robusta coffee (RMF27) is down -34 (-1.06%).

Coffee prices gave up an early advance today and turned lower, with arabica falling from a 2.5-week high and robusta dropping to a 2-week low.  Weakness in the Brazilian real (^USDBRL) is weighing on coffee prices after the real tumbled to a 17-month low against the dollar today.  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.

Coffee prices initially moved higher today, with arabica posting a 2.5-week high as ICE inventories remain tight.  ICE arabica inventories fell to a 27-year low of 217,646 bags on September 15 but are only modestly above that at 228,586 bags as of Thursday.  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, posting a 1.25-year high of 6,809 lots on October 29.

Arabica coffee dropped to a 4.75-month low on Thursday amid expectations that coffee exports out of Brazil will increase.  ICE reported that 141,194 bags of Brazilian coffee were awaiting grading at ICE warehouses as of Thursday, the most in 8.5 months.  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 14.25-month high of 112,682 bags on Wednesday.

Losses in robusta coffee are limited after India’s Coffee Board last Wednesday cut its 2026/27 India coffee production estimate to 380,000 MT, down -5% from a previous estimate of 400,000 MT, citing below-normal monsoon rains.  India is the world’s fifth-largest robusta coffee producer. 

Excessive short positions by funds in robusta coffee futures could exacerbate any short-covering rally. Last Friday’s weekly Commitment of Traders (COT) report showed funds boosted their short positions in robusta coffee by +4,767 in the week ended November 3 to 16,968 net-short positions, the most in almost four years.

Soaring coffee exports from Brazil are bearish for prices after Brazil’s Trade Ministry reported last Friday that Brazil's October coffee exports jumped +23% y/y to 287,000 MT. 

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).

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 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 ICO last month projected a record global coffee crop and a surplus.  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.