Coffee Futures Rally on Dollar Weakness and Short Covering Amid Ample Supply Outlook

December arabica coffee (KCZ26) rose 5.10 cents (+1.85%), while November ICE robusta coffee (RMX26) gained $62 per metric ton (+1.88%), lifting arabica to a one-week high. The advance was driven by a decline in the U.S. dollar index, which triggered fund short covering in coffee futures.

Prices had been under pressure over the prior four weeks, hitting three-month lows on Wednesday amid expectations of abundant global supplies. On September 10, the International Coffee Organization (ICO) projected a record 2025/26 global coffee crop and the first surplus in five years. The ICO forecast production rising 4.4% year-over-year to a record 183.6 million bags, while consumption dipped 0.9% to 180.6 million bags, leaving a 3-million-bag surplus.

On Thursday, Brazil’s crop forecasting agency Conab raised its 2026 production estimate to 67.6 million bags from 66.7 million bags previously. Brazil’s 2026 arabica output is seen climbing 34.8% to 48.21 million bags, while robusta production is expected to fall 6.6% to 19.39 million bags.

Favorable growing conditions in Brazil and Vietnam remain bearish for prices. Above-normal rainfall during the critical flowering stage in Brazil may benefit the 2026/27 harvest. Somar Meteorologia reported 33.4 mm of rain—242% of the historical average—in Minas Gerais, Brazil’s primary arabica region, for the week ended September 20. In Vietnam, forecaster Vaisala noted abundant rains have improved soil moisture and should aid cherry development in the Central Highlands, the country’s largest coffee-producing region.

Brazil’s harvest completion is adding to export supplies. Cecafe reported August total coffee exports surged 31% year-over-year to a record 4.155 million bags for the month. Arabica exports rose 26% to 2.87 million bags, while robusta exports jumped 54% to 953,592 bags. Separately, Brazil’s Trade Ministry reported August exports at 206,618 metric tons, up 44.6% and the highest in eight months.

Vietnam’s expanding output continues to pressure robusta prices. The country’s National Statistics Office reported January-August 2026 coffee exports rose 13.7% to 1.33 million metric tons, while full-year 2025 exports jumped 17.5% to 1.58 million metric tons. Vietnam’s 2025/26 production is projected to climb 6% to a four-year high of 1.76 million metric tons (29.4 million bags).

Inventory trends are mixed. ICE arabica coffee stocks fell to a 27-year low of 217,646 bags last Tuesday before recovering to a 1.5-month high of 258,415 bags last Friday. Conversely, ICE robusta inventories climbed to a 10-month high of 5,398 lots on Thursday, a bearish signal for that market.

Weather concerns provide some price support. Traders note the El Niño pattern could delay rains in Brazil this September and October during the flowering period, potentially harming the 2026/27 crop. The U.S. Climate Prediction Center indicated on July 8 that the current El Niño could be one of the strongest in over 75 years, raising the risk of floods, droughts, and temperature swings that could disrupt production across Asia and South America.

Longer-term forecasts remain bearish. The USDA’s July 22 biannual report projected 2026-27 global coffee output rising 6.0% (10.8 million bags) to a record 189.7 million bags, led by improved conditions in Brazil. Global arabica production is seen up 12%, while robusta declines 0.7%. World ending stocks are forecast to increase 1.9 million bags to 26.3 million bags. On June 3, the USDA’s Foreign Agricultural Service forecast a record 2026/27 Brazil crop of 71.9 million bags, up 14% year-over-year.

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