Current Trends and Insights in Coffee Prices
As of recent trading sessions, coffee prices have shown signs of recovery, shaking off previous losses to conclude slightly higher. Factors influencing these changes include currency fluctuations, notably a decline in the dollar index, which played a crucial role in stimulating short covering within coffee futures.
Earlier in the week, coffee contracts for July exhibited a downturn. Arabica coffee hit a five-week low, while robusta reached a six-week low. The increase in coffee inventories monitored by the Intercontinental Exchange (ICE) has contributed to the declining price trend. Robust coffee stockpiles surged to an eight-month high, while arabica inventories also saw a notable increase, reaching a three-and-a-half-month peak.
Concerns around demand have created a bearish sentiment in the coffee market. Major global brands like Starbucks and Hershey have indicated that the existing 10% baseline tariff on imports could inflate prices and negatively impact their sales volumes. This scenario further complicates the market dynamics.
Meanwhile, projections from the USDA’s Foreign Agriculture Service hint at a brighter production outlook. For the 2025/26 marketing year, Brazil’s coffee production is predicted to increase by 0.5% year-on-year, potentially reaching 65 million bags. Vietnam, a key player in the robusta coffee market, is expected to see a more pronounced rise of 6.9%, hitting 31 million bags. These figures underscore Brazil’s dominance in arabica coffee production and Vietnam’s leading position in robusta output.
Recent estimates from consulting firm Safras & Mercado have further elevated Brazil’s coffee production forecast to 65.51 million bags, up from a prior prediction. In line with these positive assessments, Brazil’s crop forecasting agency Conab also raised its estimate, predicting 55.7 million bags for the upcoming season.
Despite such encouraging production forecasts, adverse weather conditions pose a risk to yields. Reports indicate that vital coffee-growing regions in Brazil, like Minas Gerais, have experienced significantly reduced rainfall, capturing only 12% of the historical average.
On the other hand, data reveals a slower pace in coffee sales from Brazil, with 97% of the 2024/25 coffee sales completed as of mid-May, compared to 94% at the same time last year.
The robusta segment faces challenges as well, primarily due to diminished production levels in Vietnam. The country’s coffee yield for the 2023/24 cycle has dropped by 20%, marking the lowest output in several years. This decline can be attributed to drought conditions affecting crop quality. Consequently, exports from Vietnam have also seen a sharp reduction.
In summary, while the coffee market grapples with an array of influences—from weather patterns to tariff implications—expectations for enhanced production are tempered by valid concerns regarding demand and environmental factors. The balance between these elements will likely dictate the market’s trajectory in the coming months.
