Arabica Coffee Prices Climb on Supply Concerns

September arabica coffee futures (KCU26) saw a 1.14% increase, rising 4.10 points on Thursday, driven by ongoing supply concerns. In contrast, September ICE robusta coffee futures (RMU26) declined by 0.43%, dropping 16 points. Arabica coffee consolidated below its 6.5-month high reached on Wednesday, while robusta remained under pressure from rising inventory levels.

The primary driver behind the rise in arabica coffee prices is the sluggish pace of the harvest in Brazil, the world's largest coffee producer, which is limiting overall supplies. According to Safras & Mercado, Brazil's 2026/27 coffee harvest was 90% complete as of August 12, lagging behind last year's 97% and the five-year average of 94%. Specifically, the arabica coffee harvest was only 86% complete, compared to 95% last year. This slow progress led to ICE arabica coffee inventories falling to a 2.75-year low of 229,214 bags on Tuesday, providing significant support to prices.

The robusta coffee market, however, presented a different picture. ICE robusta inventories climbed to a 5.25-month high of 4,622 lots on Tuesday, exerting downward pressure on prices. Meanwhile, drier weather conditions in Brazil have allowed the pace of the coffee harvest to accelerate, potentially capping further gains for arabica. In Minas Gerais, Brazil's main arabica-coffee growing region, rainfall in the week ending August 16 was only 0.6 mm, or 11% of the historical average. Although a 7.4 magnitude earthquake struck Colombia's coffee-growing provinces of Caldas and Risaralda on Monday, exporters reported no significant damage to coffee processing facilities, and exports through the Buenaventura port have partially resumed.

In the broader global coffee market, the U.S. Department of Agriculture (USDA) forecasts that global coffee output for the 2026-27 season will increase by 6.0% to a record 189.7 million bags, primarily due to improved growing conditions in Brazil. The USDA anticipates global arabica production to rise by 12% year-over-year, while robusta production is expected to decline by 0.7% year-over-year. Nevertheless, other institutions such as Brazil's National Supply Company (CONAB) and the Brazilian Institute of Geography and Statistics (IBGE) also project record Brazilian coffee crops of 66.7 million and 65.1 million bags, respectively, for 2026/27, with arabica driving this surge. Conversely, Vietnam's coffee exports for January-July 2026 surged by 21.1% year-over-year to 1.31 million metric tons, continuing to exert pressure on robusta prices.

Broader economic factors are also influencing the market. A stronger Brazilian real against the U.S. dollar has discouraged export sales from Brazilian coffee producers, acting as a supportive factor for arabica prices. Furthermore, concerns that an El Niño weather pattern could negatively impact Brazil's coffee crop next year, by delaying rains during the crucial September and October flowering period, are considered bullish for prices. The U.S. Climate Prediction Center indicated that the current El Niño could be one of the strongest in over 75 years. The global coffee market is expected to maintain its growth trajectory, with market research firms like Mordor Intelligence, Grand View Research, and Fact.MR projecting compound annual growth rates (CAGR) between 5.18% and 5.5% for the 2026-2031 period.

Analysts and market expectations suggest that despite forecasts for a record coffee harvest in Brazil, prices may not collapse. Brazilian exporters remain cautious, holding back deals amidst low stock levels and uncertainties surrounding the potential impact of El Niño. Similarly, Vietnamese farmers are reportedly withholding supplies, anticipating better prices, which could keep near-term availability tighter than raw production numbers imply. These factors are expected to continue influencing coffee prices in the coming period.