Sep 4 / Laleska Moda

Coffee prices ease as supply outlook improves

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  • Arabica and Robusta futures prices have fallen in recent days, amid growing expectations of a shift in the global supply outlook. 

  • While Brazilian export figures are expected to show a strong recovery in August, rainfall has reached the country's coffee-producing regions, with more precipitation expected in the coming weeks, favoring the development of the 27/28 season.   

  • On the Robusta side, partial export data from Vietnam also shows that the country’s exports continue on the upside, increasing the prospects of ample supply in the short term. At the same time, Robusta certified stocks have also recovered in the past weeks. 

  • On the macroeconomic side, the recent hike in the U.S. and other major economies' treasury bonds could also contribute to the current volatility in the market. 

Coffee prices ease as supply outlook improves

After finding support between July and August, coffee futures prices retreated sharply over the past few days amid expectations of a shift in the global supply outlook. The December/26 Arabica contract fell 5,5% during the week, closing Friday at 295.6 c/lb, while the November/26 Robusta contract declined 2.8%, ending at 3,430 USD/mt.

One of the main drivers has been the improving supply outlook from Brazil for both the 2026/27 and 2027/28 seasons. The market is patiently awaiting the official Cecafé export figures, which are expected to be released around mid-September. However, partial data through August 31st suggest a strong recovery in export volumes during the month, indicating that trade activity in Brazil may be increasing and signaling that the record crop is finally reaching destination markets.

Beyond shipments, recent weather developments in the country have also contributed to the bearish momentum. As the 2026/27 harvest is now largely complete, recent rainfall across much of southeastern Brazil has improved prospects for the development of the 2027/28 crop. With further rainfall forecast for most coffee-producing regions over the coming week (see the report here), followed by rising temperatures, widespread flowering could be triggered.

If flowering is substantial, it would likely add further pressure on prices. Technical momentum in the Arabica market also remains neutral, with the Relative Strength Index (RSI) not yet in oversold territory, leaving room for additional downside in the December/26 contract. Should weather conditions in Brazil remain favorable, Arabica prices are likely to remain below 300 c/lb.

Cumulative Precipitation in Brazil’s Coffee Regions (mm)

Source: Somar, Bloomberg, Hedgepoint

Precipitation Forecast in Brazil for the next 14 days – European Model (mm)

Source: World AG Weather

On the Robusta side, beyond Brazil, Vietnam's export figures are also expected to remain strong in August, according to partial Customs data, reinforcing expectations of ample short-term supply. Robusta certified stocks, unlike Arabica's, have also shown a strong recovery in recent weeks, supported by increased deliveries from Brazil and Indonesia.

However, it's worth mentioning that the RSI is also nearing the oversold zone, which could trigger some covering, especially as the risk of an impact from El Niño still lingers on the horizon and as the Vietnam 2026/27 harvest is expected to gain pace only in late October. 

Robusta Certified Stocks (‘000 bags)

Source: ICE

Macroeconomic developments have also likely contributed to increased volatility across commodity markets, as bond markets recorded significant moves this week. Both 10-year and 30-year government bond yields in major economies, including the United States, Japan, France, Britain, and Germany, rose sharply in recent days, reaching multi-year highs. The move reflects ongoing conflicts in the Middle East, which continue to fuel inflationary concerns, particularly in Europe, as well as growing worries about rising fiscal deficits in the United States and Japan. In the U.S., rising real yields have become increasingly prominent as expanding government debt – now surpassing $40 trillion – coincides with resilient economic growth and bond sales. Besides that, there has been a surge in bond sales to fund AI investments by tech hyperscalers, pushing corporate bonds to a record high and alerting central banks around the world. 
 

For the coffee industry, rising borrowing costs worldwide warrant close attention, as the market structure of recent years has already increased financing costs across the supply chain. Higher yields, particularly in consuming countries, could keep funding and carry costs elevated for roasters, importers, and traders, discouraging inventory rebuilding. With destination stocks remaining relatively low, as observed during the previous season, coffee prices are likely to remain highly sensitive to supply-related developments, suggesting that market volatility could persist in the medium term.

U.S. Treasury bonds 

Source: LSEG

In Summary

Coffee futures fell sharply this week as improving supply prospects weighed on market sentiment. Expectations of stronger Brazilian exports, supported by preliminary August shipment data, suggest that the country's record crop is increasingly reaching destination markets. At the same time, favorable rainfall across Brazil's main coffee-growing regions has improved prospects for the 2027/28 crop, with widespread flowering potentially adding further pressure on prices.

On the Robusta side, strong Vietnamese export flows and recovering certified stocks have reinforced expectations of ample short-term supply. Meanwhile, rising government bond yields in major economies have increased volatility across commodity markets and raised concerns about higher financing costs. 

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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