May 28 / Laleska Moda

Live with Experts – Coffee Market Highlights

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In this article, you can find the main points discussed during our Live with Experts – Coffee Market event on May 28. You can also access this link to see the complete record.  

Macroeconomic and price overview

Although recent discussions about a potential peace deal have kept oil prices steady, the energy crisis continues to put pressure on global economies. Meanwhile, safe havens, such as gold, continue to attract investors’ interest. The dollar also gained some ground in the past days, but the currency is still below the past two-year levels, as investors assess the risks regarding the US economy.

With the ongoing war, inflation in the country continues to rise, with both the CPI (Consumer Price Index) and PCE (Personal Consumption Expenditures) rising in April, including the core indicators. In this scenario, though the Fed Committee voted again to keep rates steady at 3.5%-3.75%, there are growing doubts about the policy path, which could prompt future interest rate hikes. Higher interest rates could also impact on the coffee market, keeping financial costs high. 

Fed Funds, PCE, and PCE Core

Source: LSEG

BRL at its highest levels in 2-years

Source: LSEG

For coffee, another point of attention in the BRL valuation in 2026, which is also potentially impacting Brazilian coffee exports, as farmers now receive less for shipments. Although possible changes in US policy could reduce the rate differential with Brazil, the BRL is still benefiting from the carry trade and foreign investment in Brazil, operating at its highest value in years. 

Regarding coffee prices, a record crop in Brazil in the 26/27 season puts downward pressure on prices. But the short-term low availability in other origins and lower farmer selling in Brazil is capping part of the movement. The worries over the El Niño could also limit bearish momentum. However, if supply from Brazil becomes more comfortable in the market, corrections are expected.

Arabica: July-September Spread (c/lb)

Source: LSEG

Arabica: Speculative Funds Net Position (lots) and First contract (c/lb) 

Source: CFTC

Looking at spreads, Arabica July-September still indicates an inverted market, although levels are lower than in previous months. Higher spread levels also increase financial costs and can impact stock recovery in destinations, as it is more expensive to build stocks.

On the other hand, funds are showing a more bearish market. While net speculative funds' position is still long, they have trimmed their net position in recent months, in light of the substantial Brazilian crop in 26/27. This shift in position also occurred at a time when open interest was increasing, signaling a slightly bearish trend. For funds to go short, however, the supply needs to be more comfortable.

Brazilian 26/27 harvest to gain pace 

Due to delays in 2025 flowering and the record coffee volume in 26/27, the harvest pace is behind previous cycles. For now, reports show an increase in screen size and good cup quality, although more definitive figures will only come after June, when harvest is expected to gain pace, given the current volume of green beans.

Regarding coffee production, in April, we revised up our estimates for both Arabica and Conilon, with a total crop of 75.6 M bags of coffee, a new record. However, we will revise these figures again in July, when processing yields will be evaluated. Exports and demand figures will also be revised later.

Brazil: Arabica Harvest Rate (% of total)

Source: Safras & Mercado

Brazil: Conilon/Robusta Harvest Rate (% of total)

Source: Safras & Mercado

Despite the proximity to the harvest, farmers refrained from selling large volumes of coffee, with commercialization in the country below that of previous years. Forward sales for the new season are also below average levels, especially as future prices continue below those from the physical market. This has also been reflected in 25/26 export figures, although the US tariffs also impacted the Brazilian[LC1.1] shipments early in the season. 

Other origins’ availability is tight 

As most Arabica origins are now in their off-season, with stocks decreasing and farmers waiting for better prices, differentials started to increase. In Brazil, although lower than in early 2026, differentials are still high. In Colombia, not only the 25/26 season has a decrease from 24/25, but a stronger peso has also been limiting exports from the country and supporting differentials. 

On the Robusta side, while supply in Vietnam is more limited now with the off-season, the harvest in Indonesia is slightly delayed due to heavy rain, impacting supply, especially after the strong Indonesian exports until early 2026. The floods during the 26/27 season development also impacted production in the cycle, although past years' investments should allow for good exports in the 26/27 cycle.

El Niño poses a risk to the supply 

The NOAA increased the chance of the event emerging in May-July (82%) and continuing throughout the 26/27 winter of the northern hemisphere, or the summer of the southern hemisphere. 

• The forecast for temperatures in the Pacific indicates a strong or very strong event.  
• Although there are still uncertainties about how strong and when the El Niño peak will be, the event could impact coffee production in 2026 and 2027.

Official NOAA ENSO Probabilities and Strength (May 2026, %)

Source: NOAA

In Summary

Weekly Report — Coffee

Written by Laleska Moda

laleska.moda@hedgepointglobal.com

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

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