Robusta coffee futures experienced a notable rally on Friday, with July ICE robusta coffee (RMN26) closing up +57 points, or +1.68%. This upward movement was primarily attributed to persistent dry weather in Vietnam, the world’s largest robusta producer, which has intensified concerns regarding the health and yield of the nation’s robusta coffee crop. In contrast, July arabica coffee (KCN26) settled down -1.05 points, a -0.38% decline, resulting in a mixed close for coffee prices.
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Vietnam’s Dry Spell Threatens Robusta Harvest
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The immediate catalyst for robusta’s gains stems from inadequate rainfall in Vietnam’s Central Highlands, the country’s primary coffee-growing region. Weather forecaster Vaisala reported that recent showers have been spotty, emphasizing the critical need for more precipitation to support robusta cherry growth. This dry spell casts a shadow over Vietnam’s projected 2025/26 coffee production, which the National Statistics Office had previously forecast to climb +6% year-over-year to a four-year high of 1.76 million metric tons (29.4 million bags).
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Despite these concerns, Vietnam’s coffee exports have been robust. The National Statistics Office indicated that Vietnam’s 2026 coffee exports from January to April surged by +15.8% year-over-year to 810,000 metric tons. Furthermore, 2025 coffee exports jumped by +17.5% year-over-year to 1.58 million metric tons, a factor that typically exerts bearish pressure on robusta prices.
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Arabica Declines Amid Improved Global Supply Outlook
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While robusta found support, arabica prices have faced downward pressure, with futures falling to a 1.5-year nearest-futures low earlier in the week. This decline is largely influenced by an improved global supply outlook, particularly from Brazil, the world’s largest coffee producer. Analysts have provided optimistic forecasts for Brazil’s upcoming harvests.
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On May 7, the Coffee Trading Academy projected Brazil’s 2026/27 coffee harvest to increase by +12% year-over-year to 71.4 million bags. Further bolstering this outlook, Marex Group Plc projected a record 2026/27 Brazilian coffee crop of 75.9 million bags on March 19, surpassing Sucafina’s forecast of 75.4 million bags, which would represent a +15.5% year-over-year increase. StoneX also raised its Brazil 2026/27 coffee production estimate to a record 75.3 million bags in March, up from a November estimate of 70.7 million bags. StoneX additionally projected that the 2026 global coffee surplus would expand significantly to 10 million bags from 1.8 million bags in 2025, marking the biggest surplus in six years.
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El Niño Risks and Inventory Shifts
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Looking ahead, concerns about an emerging El Niño weather pattern could introduce volatility. The US National Oceanic and Atmospheric Administration (NOAA) estimates an 82% probability that El Niño conditions will emerge between May and July and persist through the end of the year, with a 67% chance of a “Super El Niño.” Coffee trader Commercial noted that this pattern may delay rains in Brazil during September and October, a critical period for tree flowering, potentially hurting Brazil’s 2026/27 coffee crop and providing supportive momentum for prices.
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Meanwhile, ICE coffee inventories have shown mixed trends. ICE robusta inventories, after falling to a two-year low of 3,631 lots last Friday, recovered to a six-week high of 3,968 lots on Friday. ICE arabica coffee inventories, however, fell to a three-month low of 449,567 bags on Friday, indicating tightening supply in that segment.
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Global Trade Dynamics and Geopolitical Factors
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Smaller exports from Brazil have also contributed to price support. Cecafe reported that Brazil’s April green coffee exports fell -1.3% year-over-year to 2.76 million bags. Geopolitical factors, such as the ongoing closure of the Strait of Hormuz, continue to disrupt global coffee supplies. This closure has tightened supplies by increasing global shipping rates, insurance, fertilizer, and fuel costs, thereby raising expenses for coffee importers and roasters.
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Conversely, the International Coffee Organization (ICO) reported on November 7 that global coffee exports for the current marketing year (October-September) fell -0.3% year-over-year to 138.658 million bags, a bearish indicator.
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USDA Projections for 2025/26
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The USDA’s Foreign Agriculture Service (FAS) bi-annual report on December 18 offered a comprehensive outlook for 2025/26. FAS projected that world coffee production would increase by +2.0% year-over-year to a record 178.848 million bags. This includes a projected -4.7% decrease in arabica production to 95.515 million bags, offset by a substantial +10.9% increase in robusta production to 83.333 million bags. FAS forecasted Brazil’s 2025/26 coffee production to decline by -3.1% year-over-year to 63 million bags, while 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. Despite the overall production increase, FAS forecasts that 2025/26 ending stocks will fall by -5.4% to 20.148 million bags from 21.307 million bags in 2024/25.
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The coffee market remains a complex interplay of immediate weather-driven supply concerns, particularly for robusta in Vietnam, alongside longer-term production forecasts and broader macroeconomic and geopolitical influences. While robusta prices reacted sharply to the Vietnamese drought, the overall market picture is characterized by mixed signals, with robust global supply projections for arabica tempering some of the bullish sentiment.
