Jul 3 / Laleska Moda

Low stocks and technicals factors push coffee prices up

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  • Coffee prices continued to soar this week, as the September/26 Arabica contract surpassed important resistance levels and neared the 310 c/lb level on Wednesday, supported by near-term fundamentals and technical factors. 

  • Speculative funds have switched back to net long positions, while hedge funds have also increased their long positions. Other technical indicators also point to a bullish trend in the short term, although RSI for Arabica is nearing the overbought territory. 

  • On the fundamental side, the harvest remains delayed in Brazil, although the weather has improved in the past few days and should contribute to the pace increase.

  •  As supply remains a concern in the short term, stocks in destinations remain low. ICE-certified stocks also continue to fall, especially Arabica ones, as other countries are in their off-season and differentials have increased, discouraging new certifications.      

Low stocks and technicals factors push coffee prices up 

Coffee prices have remained highly volatile in recent days, with the September Arabica contract surpassing the 300 c/lb level on Tuesday and closing on Wednesday near 310 c/lb, its highest level since March. Although weather conditions have improved in Brazil this week, the Arabica harvest remains behind the pace observed in previous years. At the same time, low inventories in destination markets have helped support the current strength in prices. Additionally, speculative funds shifted back to net long positions last week, while hedge funds also increased their long exposure as prices broke through key resistance levels, further amplifying the upward movement.

As a result, the September 2026 Arabica contract closed at 301.2 c/lb on Thursday, July 2, up 10.25% from last Friday. The NY exchange was closed on Friday, July 3, in observance of the Independence Day holiday. From a technical perspective, the MACD (Moving Average Convergence Divergence) continues to reinforce the bullish momentum. However, it is important to note that the Relative Strength Index (RSI) is now in overbought territory, which could lead to a pause or a modest pullback following such a strong rally.

As for Robusta, the September contract settled at 3,716 USD/mt on Thursday, up 2.5% from last Friday. The MACD also points to strengthening bullish momentum, while the RSI is approaching overbought territory, but to a lesser extent than Arabica, which could help sustain the current price trend. In recent weeks, speculative funds have expanded their net long positions, reinforcing the market's bullish sentiment. Prices continue to reflect not only the delays in the Brazilian harvest but also the growing concerns over the potential impact of El Niño on global Robusta production.

Arabica: Relative Strength Index 

Source: LSEG

Robusta: Relative Strength Index 

Source: LSEG

On the fundamentals side, weather conditions in Brazil improved this week, with rainfall subsiding and temperatures rising, allowing harvesting activities to resume. The forecast for the coming days remains favorable for fieldwork, which could help accelerate harvest progress. On the other hand, the excessive rainfall in June resulted in one of the lowest harvest completion rates in Brazil’s Arabica-producing regions in recent seasons and also delayed the drying process, likely limiting the volume of coffee reaching the market in the coming weeks. Although higher prices have stimulated sales over the past few days, volumes remain below what is typically expected for this time of the year.

Beyond Brazil, the harvest in Indonesia was also delayed due to heavy rainfall during the first half of 2026. Reports indicate that harvesting is now gaining momentum, but the peak of the crop is not expected until late July, which should continue to constrain supply availability in the coming weeks.

CCSR/IRI ENSO Strength Categories (%, June, 2026)

Source: ICO

Arabica: September-December Spread (c/lb)

Source: ICO

While short-term supply concerns persist, inventories in destination markets remain at historically low levels. The latest data from both the European Coffee Federation (ECF) and the Japan Coffee Association (JCA) show stocks at their lowest levels in years (see the ECF report and the JCA report here). ICE-certified stocks have also continued to decline over recent weeks, reinforcing this trend and suggesting that market participants are increasingly relying on exchange inventories amid limited origin supply and elevated differentials.

Although Brazilian differentials have weakened in recent months as the harvest progresses, other origins, such as Central America and East Africa, are currently in their off-season, with limited supply and firming differentials. Current differential levels also discourage coffee certification in these regions, a trend reflected in ICE’s pending grading figures (see report here). With stocks remaining concentrated at origin and overall supply still constrained, coffee prices are likely to remain highly volatile in the coming weeks – particularly for the September contract – until the availability of Brazilian beans increases more significantly in the market.

Arabica Differentials (c/lb)

Source: LSEG, Safras& Mercado

In Summary

Coffee prices have rallied sharply in recent days, supported by a combination of delayed harvests, low inventories, and renewed fund buying. In Brazil, June rainfall significantly slowed the Arabica harvest and drying activities, limiting the flow of coffee to the market despite improved weather conditions and stronger producer selling in recent days. Indonesia has faced similar challenges, with heavy rains delaying the Robusta harvest and peak crop availability now expected only later in July. At the same time, speculative and hedge funds have increased their long positions, reinforcing the bullish momentum as prices broke key technical resistance levels.

On the demand and supply side, coffee stocks remain unusually low across destination markets, with inventories in Europe, Japan, and ICE-certified warehouses continuing to decline. While Brazilian differentials have eased with harvest progress, other origins such as Central America and East Africa remain in their off-season, keeping supply limited and differentials elevated. Technical indicators remain supportive, with MACD signaling bullish momentum in both Arabica and Robusta, although the RSI suggests Arabica is approaching overbought territory. As a result, coffee prices are expected to remain highly volatile in the coming weeks, particularly until a larger volume of Brazilian coffee becomes available to the market.

Weekly Report — Coffee

Written by Laleska Moda

laleska.moda@hedgepointglobal.com

Reviewed by Carolina França
carolina.franca@hedgepointglobal.com
www.hedgepointglobal.com

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