Robusta Coffee 10-T May '26 (RMK26)

Description

Coffee is one of the world's most important cash commodities. Coffee is the common name for plants in the genus Coffea, which belongs to the madder family. Coffee is a tropical evergreen shrub that can grow up to 100 feet tall. The coffee tree grows in tropical regions between the Tropics of Cancer and Capricorn in areas with abundant rainfall, year-round warm temperatures averaging about 70 degrees Fahrenheit, and no frost. In the US, the only places that produce a significant amount of coffee are Puerto Rico and Hawaii. The coffee plant will produce its first full crop of beans at about 5 years old and remain productive for about 15 years. The average coffee tree produces enough beans to make about 1 to 1 ½ pounds of roasted coffee per year. It takes approximately 4,000 handpicked green coffee beans to make a pound of coffee. Wine was the first drink made from the coffee tree using coffee cherries, honey, and water. In the 17th century, the first coffee house, also known as a "penny university" because of the price per cup, opened in London. The London Stock Exchange grew from one of these first coffee houses.

Coffee is generally classified into two types of beans: arabica and robusta. The most widely produced coffee is arabica, which makes up about 70 percent of total production. It grows mainly at high altitudes of 600 to 2,000 meters, with Brazil and Colombia being the largest producers. Arabica coffee is traded at the Intercontinental Exchange (ICE). The stronger of the two types is robusta. It is grown at lower altitudes, with the largest producers being Indonesia, West Africa, Brazil, and Vietnam. Robusta coffee is traded on the LIFFE exchange.

Ninety percent of the world's coffee trade is in green (unroasted) coffee beans. Seasonal factors significantly influence coffee prices. There is no extreme peak in world production at any one time of the year, although coffee consumption declines by 12 percent or more below the year's average in the warm summer months. Therefore, coffee imports and roasts both tend to decline in spring and summer and pick up again in fall and winter.

Low coffee prices can create serious long-term problems for coffee producers. When prices fall below production costs, there is little economic incentive to produce coffee, and coffee trees may be neglected or completely abandoned. When prices are low, producers cannot afford to hire the labor needed to maintain the trees and pick the crop at harvest. The result is that trees yield less due to reduced fertilizer use and fewer coffee workers employed. One effect is a decline in the quality of the coffee that is produced. Higher quality Arabica coffee is often produced at higher altitudes, which entails higher costs. It is this coffee that is often abandoned. Although pressure on producers can be severe, the market eventually returns to balance as supply declines in response to low prices.

Coffee prices are subject to upward spikes in June, July, and August due to potential freeze scares in Brazil during the Southern Hemisphere winter. The Brazilian coffee crop is harvested from May through several weeks into the winter months. A major freeze in Brazil occurs roughly every five years on average.

Coffee futures and options are traded at the ICE Futures US and ICE Futures Europe exchanges, and the B3 Exchange (formerly BM&F/BOVESPA). Coffee futures are traded on the JSE Securities Exchange (JSE).

Prices - ICE Arabica coffee futures (Barchart.com symbol KC) rallied sharply at the start of 2025, reaching an all-time high of 440.85 cents per pound in February. The impact of dry El Niño weather in 2024 led to longer-term coffee crop damage in South and Central America, damaging coffee trees during the all-important flowering stage and reducing the prospects for Brazil's 2025/26 arabica coffee crop. In April, Rabobank predicted Brazil's 2025/26 arabica coffee crop would fall by -13.6% yr/yr to 38.1 million bags, citing dry weather in key arabica-growing areas that significantly reduced coffee tree flowering. Coffee prices then retreated into July and posted their 2025 low at 280.05 cents per pound. Beneficial rains in Q2 improved the outlook for Brazil's coffee crop, as the USDA's Foreign Agricultural Service (FAS) forecast in June that Brazil's 2025/26 coffee production would increase by +0.5% year-over-year to 65 million bags. However, coffee prices trended higher into October as insufficient rain in Brazil fueled concerns that excessive dry conditions during the critical flowering period for coffee trees would threaten Brazil's 2026/27 coffee crop. Coffee prices then fell back into year-end as American buyers shunned Brazilian coffee amid high tariffs on US imports from Brazil. US purchases of Brazilian coffee from August through October, during which President Trump's tariffs were in effect, fell 52% from the same period the previous year to 983,970 bags. Also, the outlook for ample coffee supplies weighed on prices after Conab, Brazil's crop forecasting agency, raised its total Brazil 2025 coffee production estimate in December by +2.4% to 56.54 million bags, from a September estimate of 55.20 million bags. Coffee prices finished 2025 up by +9.1% yr/yr at 348.75 cents per pound.

Supply - World coffee production in the 2025/26 marketing year (July-June) rose by +2.0% yr/yr to 178.848 million bags (1 bag equals 60 kilograms or 132.3 pounds). Coffee ending stocks in the 2025/26 marketing year fell by -5.4% yr/yr to 20.148 million bags. Brazil is the world's largest coffee producer by far, accounting for 35.2% of global supply, followed by Vietnam at 17.2%.

Demand - World consumption of green coffee in 2025/26 rose by +1.3% yr/yr to 173.852 million bags.

Trade - World coffee exports in 2025/26 rose by +1.8% yr/yr to 150.095 million bags, above the 2024/25 record high of 147.373 million bags. The world's largest exporters of coffee in 2025/26 are Brazil (27.1%), Vietnam (18.6%), and Colombia (8.4%). US coffee imports in 2024 rose by +7.1% yr/yr to 26.062 million bags, below the record high of 29.216 million bags in 2019. The key countries from which the US imported coffee in 2024 were Brazil (30.2% of total US imports), Colombia (17.7%), Mexico (6.0%), and Guatemala (5.1%).

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