Coffee futures experienced a downturn on Monday, with July arabica coffee (KCN26) closing down -0.90, or -0.31%, primarily due to the strengthening U.S. dollar. This currency movement overshadowed earlier gains in the market, which had been buoyed by geopolitical tensions and concerns over global supply chain disruptions. While robusta coffee (RMN26) did not trade on Monday as UK markets observed the May Day holiday, the broader sentiment for coffee prices remains complex, influenced by a confluence of macroeconomic factors, robust production forecasts, and specific supply-side indicators.
Dollar Strength Dominates Trading Session
The U.S. dollar’s appreciation proved to be the decisive factor in Monday’s arabica market. Prices initially saw an advance, driven by anxieties surrounding a potential escalation of the US-Iran conflict. Such an escalation, analysts noted, could lead to the closure of the Strait of Hormuz, a critical maritime chokepoint. The prospect of this disruption had already begun to tighten coffee supplies by increasing global shipping rates, insurance premiums, fertilizer costs, and fuel expenses, consequently raising operational costs for coffee importers and roasters worldwide. However, the dollar’s upward trajectory ultimately exerted stronger downward pressure, erasing these early gains and pushing arabica futures into negative territory.
Brazil’s Bumper Harvest Expectations Weigh Heavily
A significant bearish factor for coffee prices stems from the optimistic projections for Brazil’s upcoming coffee harvest. Multiple analytical firms have revised their estimates upwards, signaling a potentially record-breaking crop year. Last Thursday, the Coffee Trading Academy projected Brazil’s 2026/27 coffee harvest to increase by a substantial 12% year-over-year, reaching 71.4 million bags. This forecast was echoed and even surpassed by other major players in the commodity space.
On March 19, Marex Group Plc released an even more robust projection, anticipating a record 2026/27 Brazilian coffee crop of 75.9 million bags. This figure not only represents a significant increase but also surpasses Sucafina’s forecast of 75.4 million bags, which itself indicated a 15.5% year-over-year rise. Further reinforcing this outlook, StoneX, on March 12, raised its Brazil 2026/27 coffee production estimate to a record 75.3 million bags, a considerable jump from its November estimate of 70.7 million bags. These consistent upward revisions from leading analysts collectively point towards an abundant supply from the world’s largest coffee producer, creating a strong headwind for prices.
Global Surplus and Vietnamese Export Surge
Beyond Brazil, the broader global supply picture also suggests an expanding surplus. StoneX projects that the 2026 global coffee surplus will expand significantly to 10 million bags, a sharp increase from 1.8 million bags in 2025, marking the biggest surplus in six years. This substantial increase in global availability is largely driven by robust production and export figures from other key regions.
Vietnam, the world’s largest robusta producer, has contributed significantly to this bearish sentiment through soaring export volumes. According to Vietnam’s National Statistics Office, coffee exports from January to April 2026 rose by an impressive 15.8% year-over-year, totaling 810,000 metric tons. This follows a strong performance in 2025, where exports jumped by 17.5% year-over-year to 1.58 million metric tons. Furthermore, Vietnam’s 2025/26 coffee production is projected to climb by 6% year-over-year, reaching a four-year high of 1.76 million metric tons, equivalent to 29.4 million bags.
Conflicting Signals from Inventories and Exports
Despite the overarching bearish sentiment, certain indicators suggest underlying tightness in current supplies, offering some counter-support to prices. ICE arabica coffee inventories, for instance, fell to a 2.25-month low of 494,508 bags on April 21. Similarly, signs of tighter robusta coffee supplies emerged as ICE robusta inventories dropped to a 16.25-month low of 3,755 lots last Tuesday.
Brazilian export data also presented a mixed picture. Cecafe reported on April 14 that Brazil’s March green coffee exports fell by 10% year-over-year to 2.65 million bags. Adding to this, Brazil’s Trade Ministry reported on April 7 a more significant decline, with March coffee exports falling by 31% year-over-year to 151,000 metric tons. These figures, while indicating reduced immediate supply from Brazil, are juxtaposed against the larger harvest forecasts.
However, the International Coffee Organization (ICO) reported on November 7 that global coffee exports for the current marketing year (October-September) saw a slight decline of 0.3% year-over-year, totaling 138.658 million bags, which could be seen as a minor supportive factor, though largely overshadowed by other market forces.
USDA’s Comprehensive Outlook for 2025/26
A broader perspective on future supply comes from the USDA’s Foreign Agriculture Service (FAS) bi-annual report, published on December 18. The FAS projected that world coffee production in 2025/26 will increase by 2.0% year-over-year to a record 178.848 million bags. This overall increase is driven by a significant 10.9% rise in robusta production, reaching 83.333 million bags, even as arabica production is expected to see a 4.7% decrease to 95.515 million bags.
Specifically, FAS forecasted Brazil’s 2025/26 coffee production to decline by 3.1% year-over-year to 63 million bags, a figure that contrasts with the more optimistic projections for the 2026/27 crop from other analysts. Conversely, Vietnam’s 2025/26 coffee output is expected to rise by 6.2% year-over-year to a four-year high of 30.8 million bags, reinforcing the robusta supply strength. Despite the record production forecast, FAS also projected that 2025/26 ending stocks will fall by 5.4% to 20.148 million bags from 21.307 million bags in 2024/25, suggesting that consumption might keep pace with the increased output to some extent.
The coffee market currently navigates a complex landscape where a strong U.S. dollar, coupled with expectations of a bumper Brazilian harvest and surging Vietnamese exports, exerts significant downward pressure on prices. While localized inventory tightness and some export declines offer minor counterpoints, the overarching narrative points towards an expanding global surplus. This interplay of currency strength and fundamental supply dynamics will likely continue to dictate price movements in the near term, with the dollar’s trajectory remaining a critical determinant for coffee futures.
