Coffee futures saw a notable rebound on Friday, with September arabica and robusta contracts closing higher after a sharp sell-off earlier in the week. September arabica coffee (KCU26) advanced by +4.40, or +1.42%, while September ICE robusta coffee (RMU26) gained +49, or +1.32%. This recovery followed a period of significant decline on Thursday, which saw NY Sep coffee briefly touch a new 2.5-week low before apparent pre-weekend short-covering spurred a turnaround.
Tariff Adjustments and Brazil’s Exemption
The coffee market is currently navigating the implications of President Trump’s late-Thursday announcement regarding new broad tariffs. These tariffs, ranging from 10% to 12.5%, are set to be imposed on 60 nations, replacing a 10% global import tax that recently expired. The new measures are based on trade authority under Section 301 of the Trade Act of 1974, citing claims of forced labor in supply chains. This move follows the Supreme Court’s decision in February to strike down previous reciprocal tariffs and the subsequent expiration of the substitute global import tax.
Crucially for the coffee sector, the new forced-labor tariffs include significant exclusions, such as fuel, foods, fertilizer, and products covered by the North American trade agreement with Mexico and Canada. Brazil’s Development, Industry, Trade and Services Minister Marcio Elias Rosa addressed reporters in Brasilia late Thursday, confirming that Brazilian farm products—including coffee, meat, orange juice, and fruit—would not be subject to these new tariffs. This clarification suggests that the new trade policies are unlikely to disrupt coffee exports from Brazil to the United States, alleviating a potential bearish pressure point for the market.
Global Supply Forecasts Signal Record Output
Despite Friday’s rebound, coffee prices faced downward pressure on Thursday, largely influenced by the U.S. Department of Agriculture’s (USDA) forecast released late Wednesday. The USDA projected a substantial increase in global coffee output for the 2026-27 season, anticipating a rise of +6.0%, or 10.8 million bags, to a record 189.7 million bags. This significant increase is primarily attributed to improved growing conditions in Brazil, the world’s largest coffee producer.
Delving into the specifics, the USDA expects global arabica production to climb by +12% year-over-year. In contrast, robusta production is forecast to experience a slight decline of -0.7% year-over-year. Concurrently, world ending stocks are projected to increase by +1.9 million bags, reaching a total of 26.3 million bags. Further reinforcing the outlook for robust supply, the USDA’s Foreign Agricultural Service (FAS) had previously forecast on June 3 a record 2026/27 Brazil coffee crop of 71.9 million bags, representing a +14% year-over-year increase.
Harvest Dynamics and Inventory Divergence
The pace of Brazil’s coffee harvest presents a mixed picture for price dynamics. While the outlook for drier conditions in the country’s coffee-growing regions over the near-term is expected to accelerate the harvest, the current slow pace remains supportive of coffee prices. Data from Cooxupe co-op indicated that its harvest was only 47.3% complete as of July 17, lagging behind the 59% recorded at the same point last year. Similarly, Safras & Mercado reported on July 15 that Brazil’s 2026/27 coffee harvest was 64% complete, trailing last year’s comparable level of 77% and the five-year average of 70%.
Inventory levels are also contributing to divergent trends within the coffee market. Rising inventories are exerting pressure on robusta coffee prices, with ICE robusta inventories reaching a 4-month high of 4,254 lots on Wednesday, before settling slightly lower at 4,200 lots on Friday. Conversely, a bullish factor for arabica coffee prices emerged as ICE arabica coffee inventories fell to a 2.5-year low of 311,317 bags on Friday, signaling tighter supply for this variety.
El Niño Concerns and Regional Weather
Looking ahead, concerns surrounding an emerging El Niño weather pattern are providing bullish support for coffee prices, particularly regarding its potential impact on Brazil’s crop next year. Coffee trader Commercial noted that the El Niño phenomenon could delay crucial rains in Brazil during September and October, a period when tree flowering typically occurs. Such a delay could significantly harm Brazil’s 2026/27 coffee crop.
The severity of this threat was underscored on July 8, when the US Climate Prediction Center stated that the El Niño weather pattern, which emerged across the equatorial Pacific last month, is likely to be one of the strongest in over 75 years. This forecast sets the stage for months of potential floods, droughts, and temperature fluctuations later this year, which could impede coffee production across key regions in Asia and South America. Local reports further highlight these concerns; Somar Meteorologia reported on Monday that only 0.2 mm of rain, or 20% of the historical average, fell in the week ended July 19 in Minas Gerais, Brazil’s largest coffee-growing region.
Vietnam’s Export Surge Weighs on Robusta
Adding another layer of complexity to the robusta market, soaring coffee exports from Vietnam, the world’s largest robusta producer, are exerting bearish pressure. According to Vietnam’s National Statistics Office, reported on July 3, the country’s 2026 coffee exports for the January-June period rose by +7.3% year-over-year to 1.05 million metric tons (MMT). This follows a significant jump in Vietnam’s 2025 coffee exports, which increased by +17.5% year-over-year to 1.58 MMT. Furthermore, Vietnam’s 2025/26 coffee production is projected to climb by +6% year-over-year, reaching a 4-year high of 1.76 MMT, equivalent to 29.4 million bags.
The intricate balance of these factors—ranging from geopolitical trade policies and global supply forecasts to localized harvest challenges, inventory shifts, and looming climate threats—underscores the inherent volatility in the coffee futures market. While Friday’s rebound offered a reprieve, the underlying dynamics of robust supply expectations, coupled with specific bullish and bearish regional developments, suggest continued price fluctuations as market participants assess the long-term outlook for this vital commodity.
