May 30 / Laleska Moda

Robusta’s prices reach new lows as harvest in Brazil and Indonesia gains pace

  Back to main blog page
  • Robusta futures prices have dropped sharply in recent days. The July contract hit a six-and-a-half-month low on Thursday, with cumulative losses of 4.8% for the week. For Arabica, while macroeconomic data from the U.S. on Thursday seems to have capped some of the decline, July’s contract still dropped 5.1% over the week, though.

  • The spreads for short-term contracts on both varieties have also fallen, highlighting the recent easing of supply concerns, particularly for Robusta. This is due to the growing pace of the 25/26 harvest in Brazil and Indonesia.

  • In Brazil, 20% of the total expected crop has already been harvested. With the current dry weather, the pace is expected to increase in the coming weeks, and more coffee will be available on the market by the end of June. However, sales are still low on the physical market due to current tight stocks and price drops.

  • In Asia, the Indonesian harvest is picking up pace, and more coffee is currently available on the market. This has led to a further drop in differentials. Although there is still no data on April's exports, an increase in Indonesian volume is expected, following the trend of the past few months.

Robusta’s prices reach new lows as harvest in Brazil and Indonesia gains pace

Coffee prices continued to move further away from previous highs in the last week of May, as expectations of short-term supply relief increased, especially for Robusta coffee, given ongoing harvests in Brazil and Indonesia for the 25/26 cycle. The July contract for this variety saw cumulative losses of 4.8% over the course of the week, even touching a six-and-a-half-month low on Thursday.

For Arabica July’s contract, while macroeconomic data from the US limited part of the decline on Thursday, the ongoing Brazilian harvest, still led to a drop of 5.1% over the week.. On the macro front, the US GDP decreased by 0.2%, Which was a better-than-expected result and brought some optimism to the market, as coffee demand usually responds positively to GDP growth. However, jobless claims exceeded expectations, which could impact the Fed’s decision in June. Meanwhile, corporate profits decreased sharply in the first quarter due to the effects of tariffs.

Regarding the tariffs, more uncertainty was introduced to the market when, on Wednesday, a U.S. trade court blocked most of the tariffs from going into effect, arguing that Trump was overstepping his authority. The next day, however, a federal appeals court reinstated most of the tariffs and ordered the plaintiffs in the cases to respond by June 5, and the administration by June 9.

LN – Robusta (USD/mt), NY – Arabica and Arbitrage (c/lb)

Source: LSEG

Despite the turmoil in the macro environment, the coffee market is likely to respond more strongly to supply news in the short term. In this regard, the current spread between the July and September contracts for Robusta and Arabica dropped in May due to the expectation of increased supplies in the coming months.

In Brazil, 20% of the 25/26 harvest has been completed, with 31% of the Conilon crop and 14% of the Arabica crop harvested, more in line with average levels. The harvest is also showing promising results in terms of quality and bean size. Processing yields are more in line with average levels compared to the disappointing 24/25 season. Although a drop in total Arabica production is expected, the harvest is showing good results, with an expected recovery in Conilon production. Drier weather and low chances of frost, at least for now, could bring more coffee to market by the end of June and early July.

Robusta Spreads: July – Spetember (USD/mt)

Source: LSEG

Arabica Spreads: July – September (c/lb)

Source: LSEG

Meanwhile, the volume of Indonesia’s 25/26 Robusta beans is increasing in the market. The harvest, which occurs at the same time as Brazil’s Conilon harvest, is reaching its peak. The increased supply has already lowered Asian differentials and could lead to further corrections on London prices. According to recent news reports, many farmers and exporters are taking advantage of the 90-day tariff pause to ship coffee to the U.S. Although news regarding tariffs changes from time to time, uncertainties continue in the market, and buyers may prefer to secure coffee now. This could lead to an increase in Indonesian export figures between April and July.

Regarding sales, however, both the physical and futures markets are quiet in Brazil, with low volumes traded. Farmers may increase sales in the coming weeks as coffee supplies improves, but they are likely to sell older beans first and store the new ones since the harvest period is usually marked by lower prices. Overall, it is expected that most farmers will hold onto more of the 25/26 season until the first flowering and a clearer definition of the 26/27 cycle emerges, which could cap some of the expected price corrections in the coming months, at least for Arabica.

Brazil: Arabica Harvest Pace (% of total)

Source: Safras & Mercado

Brazil: Conilon Harvest Pace (% of total)

Source: Safras & Mercado

In Summary

Coffee prices continued to fall this week as concerns about an increase in supply increased. Despite some developments in the U.S. macroeconomy — with better-than-anticipated GDP results in the first quarter — and increased uncertainty regarding tariffs, the coffee market is being affected more by supply fundamentals.

With the ongoing harvest in Brazil and Indonesia, more coffee, especially Robusta beans, is expected to hit the market in the coming weeks. While sales in Brazil are still slow, the surge in beans in Indonesia is already impacting differentials, and there are expectations of an increase in the country's exports in the coming months. This could put downward pressure on Robusta prices, dropping them below 2024 levels.

Weekly Report — Coffee

Written by Laleska Moda

laleska.moda@hedgepointglobal.com

Reviewed by Lívea Coda
livea.coda@hedgepointglobal.com
www.hedgepointglobal.com

Disclaimer

This document has been prepared by Hedgepoint Schweiz AG and its affiliates (“Hedgepoint”) solely for informational and instructional purposes, without intending to create obligations or commitments to third parties. It is not intended to promote or solicit an offer for the sale or purchase of any securities, commodities interests, or investment products. Hedgepoint and its associates expressly disclaim any liability for the use of the information contained herein that directly or indirectly results in any kind of damages. Information is obtained from sources which we believe to be reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. The trading of commodities interests, such as futures, options, and swaps, involves substantial risk of loss and may not be suitable for all investors. You should carefully consider wither such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results. Customers should rely on their own independent judgment and/or consult advisors before entering into any transactions. Hedgepoint does not provide legal, tax or accounting advice and you are responsible for seeking any such advice separately. Hedgepoint Schweiz AG is organized, incorporated, and existing under the laws of Switzerland, is filiated to ARIF, the Association Romande des Intermédiaires Financiers, which is a FINMA-authorized Self-Regulatory Organization. Hedgepoint Commodities LLC is organized, incorporated, and existing under the laws of the USA, and is authorized and regulated by the Commodity Futures Trading Commission (CFTC) and a member of the National Futures Association (NFA) to act as an Introducing Broker and Commodity Trading Advisor. HedgePoint Global Markets Limited is Regulated by the Dubai Financial Services Authority. The content is directed at Professional Clients and not Retail Clients. Hedgepoint Global Markets PTE. Ltd is organized, incorporated, and existing under the laws of Singapore, exempted from obtaining a financial services license as per the Second Schedule of the Securities and Futures (Licensing and Conduct of Business) Act, by the Monetary Authority of Singapore (MAS). Hedgepoint Global Markets DTVM Ltda. is authorized and regulated in Brazil by the Central Bank of Brazil (BCB) and the Brazilian Securities Commission (CVM). Hedgepoint Serviços Ltda. is organized, incorporated, and existing under the laws of Brazil. Hedgepoint Global Markets S.A. is organized, incorporated, and existing under the laws of Uruguay. In case of questions not resolved by the first instance of customer contact (client.services@Hedgepointglobal.com), please contact internal ombudsman channel (ombudsman@hedgepointglobal.com – global or ouvidoria@hedgepointglobal.com – Brazil only) or call 0800-8788408 (Brazil only). Integrity, ethics, and transparency are values that guide our culture. To further strengthen our practices, Hedgepoint has a whistleblower channel for employees and third-parties by e-mail ethicline@hedgepointglobal.com or forms Ethic Line – Hedgepoint Global Markets. “HedgePoint” and the “HedgePoint” logo are marks for the exclusive use of HedgePoint and/or its affiliates. Use or reproduction is prohibited, unless expressly authorized by HedgePoint. Furthermore, the use of any other marks in this document has been authorized for identification purposes only. It does not, therefore, imply any rights of HedgePoint in these marks or imply endorsement, association or seal by the owners of these marks with HedgePoint or its affiliates.

To access this report, you need to be a subscriber.