Coffee Prices Fall Sharply on the Prospects of Abundant Supplies

March arabica coffee (KCH26) on Monday closed down -8.65 (-2.31%), and January ICE robusta coffee (RMF26) closed down -77 (-1.79%).

Coffee prices fell sharply on Monday, with arabica dropping to a 2-week low and robusta falling to a 2.25-month low.  Coffee prices are under pressure amid an outlook for ample supplies.  Last Thursday, Conab, Brazil's crop forecasting agency, raised its total Brazil 2025 coffee production estimate by 2.4% to 56.54 million bags, from a September estimate of 55.20 million bags.  Also, Vietnam's National Statistics Office reported last Friday that Vietnam's Nov coffee exports jumped +39% y/y to 88,000 MT and that Jan-Nov coffee exports are up +14.8% y/y to 1.398 MMT.

In a bearish factor, StoneX on November 19 forecast that Brazil will produce 70.7 million bags of coffee in the new 2026/27 marketing year, including 47.2 million bags of arabica, a +29% y/y increase.

The outlook for ample coffee supplies has recently weighed on prices after the European Parliament on November 26 approved a 1-year delay to the deforestation law, which would keep coffee supplies ample.  The EU regulation, known as EUDR, aims to tackle deforestation in countries whose exports into the EU include key commodities such as coffee, soybeans, and cocoa.  The delay of the EUDR will allow EU countries to continue importing agricultural products from regions in Africa, Indonesia, and South America where deforestation is occurring.

Below-normal precipitation in Brazil is supportive of coffee prices.  Somar Meteorologia reported Monday that Brazil's largest arabica coffee-growing area, Minas Gerais, received 11 mm of rain during the week ended December 5, or 17% of the historical average.  

Shrinking ICE coffee inventories are also supportive of prices.  The US tariffs imposed on US coffee imports from Brazil have led to a sharp drawdown in ICE coffee inventories.  ICE-monitored arabica inventories fell to a 1.75-year low of 398,645 bags on November 20, although they recovered to a 1-month high of 426,523 bags last Friday.  ICE robusta coffee inventories fell to an 11.5-month low of 4,021 lots on Monday.  American buyers voided new contracts for Brazilian coffee purchases due to the tariffs on US imports from Brazil, thereby tightening US supplies, as about a third of America's unroasted coffee comes from Brazil.  US purchases of Brazilian coffee from August through October, during which President Trump's tariffs took effect, dropped by 52% from the same period last year to 983,970 bags.

Increased Vietnamese coffee supplies are bearish for prices.  Vietnam's 2025/26 coffee production is projected to climb +6% y/y to 1.76 MMT, or 29.4 million bags, a 4-year high.  Also, the Vietnam Coffee and Cocoa Association (Vicofa) said on October 24 that Vietnam's coffee output in 2025/26 will be 10% higher than the previous crop year if weather conditions remain favorable.   Vietnam is the world's largest producer of robusta coffee.

Signs of tighter global coffee supplies are supportive of prices, as the International Coffee Organization (ICO) on November 7 reported that global coffee exports for the current marketing year (Oct-Sep) fell 0.3% y/y to 138.658 million bags.

The USDA's Foreign Agriculture Service (FAS) projected on June 25 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.  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.  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.