Global coffee prices have been rising recently amid supply scarcity as falling inventories fail to keep up with demand

• A significant rally in coffee prices has been driven by concerns over tighter global supplies, with weather conditions in Brazil playing a complex role as recent beneficial rainfall also introduced bearish pressure.
• Inventory levels for both robusta and arabica coffee have fallen to multi-month and multi-year lows, indicating a tightening of readily available supplies and strengthening the price foundation.
• Trade dynamics, including U.S. tariffs on Brazilian exports, have led to canceled contracts and further constrained supply, particularly affecting the American market which depends heavily on Brazilian beans.
• Production challenges in other key regions, such as drought-reduced output in Vietnam and declining export volumes from Brazil itself, have added supportive pressure to global prices.
• The market outlook remains divided between optimistic official forecasts for record global production and more cautious analyst projections of a deepening arabica deficit, sustaining volatility and upward price momentum.

Recently, coffee prices have experienced a notable rally, climbing to highs not seen in several months. This upward trend is largely driven by mounting concerns over tighter global supplies. A significant factor is the weather in Brazil, a paramount producer.

Stocks of both robusta and arabica coffee beans held in exchange-monitored warehouses have fallen to multi-month and multi-year lows, signaling a tightening of immediately available supplies. This physical scarcity is providing a strong foundation for higher prices. Further supporting the price rally are specific trade issues, particularly the significant tariffs the US has imposed on Brazilian exports. This has led American buyers to cancel new contracts, exacerbating supply constraints in a market that relies on Brazil for about a third of its unroasted coffee beans.

The supply situation from other major producers adds another layer of support. Vietnam, a global leader in robusta production, saw its output drop substantially last year due to drought, resulting in the smallest harvest in four years and a sharp decline in its exports. Although recent data suggests a partial recovery in Vietnamese exports is underway, it has not been enough to fully counterbalance the earlier shortfalls. Meanwhile, Brazil’s own export figures have shown a pronounced decline, with recent monthly shipments falling significantly compared to the previous year.

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Looking ahead, forecasts for the upcoming season present a mixed outlook. While the recent rains have been beneficial for the upcoming flowering period, alleviating some crop stress and applying a bearish pressure to the market, other dynamics are creating a complex picture. Some official projections anticipate a rise in global production to record levels, with expectations of larger harvests from both Brazil and Vietnam.