Coffee Prices Push Higher as Brazilian Real Strength Sparks Short Covering

March arabica espresso (KCH26) on Friday closed up +8.55 (+2.45%).  March ICE robusta espresso (RMH26) closed up +5 (+0.13%).

Espresso costs recovered from early losses on Friday and settled greater as energy within the Brazilian actual sparked brief overlaying in espresso futures.  The true (^USDBRL) rallied to a 2-week excessive in opposition to the greenback on Friday, discouraging export gross sales from Brazil’s espresso producers.

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Espresso costs are additionally supported by widespread flooding in Indonesia, which pushed arabica espresso as much as a 2-week excessive on Tuesday and threatens to scale back the nation’s espresso exports by as a lot as 15% within the 2025-26 season, in accordance with the chairman of the Affiliation of Indonesian Espresso Exporters and Business.  The flooding has affected a couple of third of Indonesia’s arabica espresso farms in northern Sumatra in latest weeks.  Indonesia is the world’s third-largest producer of robusta.

Espresso additionally has carryover help from Monday on Brazil espresso crop considerations, with Somar Meteorologia reporting that Brazil’s largest arabica coffee-growing space, Minas Gerais, acquired 11.1 mm of rain throughout the week ended December 26, or 17% of the historic common.  

Shrinking ICE espresso inventories are bullish for costs.  ICE-monitored arabica inventories fell to a 1.75-year low of 398,645 baggage on November 20, though they recovered to a 2-month excessive of 456,477 baggage final Wednesday.  ICE robusta espresso inventories fell to a 1-year low of 4,012 tons on December 10 however recovered to a 4-week excessive of 4,278 tons final Tuesday and Wednesday.

American patrons shunned Brazilian espresso purchases as a consequence of earlier excessive tariffs on US imports from Brazil.  These US tariffs have since been reduce, however US espresso inventories are nonetheless tight.  US purchases of Brazilian espresso from August via October, throughout which President Trump’s tariffs have been in impact, dropped by 52% from the identical interval final 12 months to 983,970 baggage.

The outlook for ample espresso provides is weighing on costs.  On December 4, Conab, Brazil’s crop forecasting company, raised its whole Brazil 2025 espresso manufacturing estimate by 2.4% to 56.54 million baggage, from a September estimate of 55.20 million baggage.  

Robusta espresso stays underneath strain amid considerations about ample provides.  On December 5, Vietnam’s Nationwide Statistics Workplace reported that Vietnam’s Nov espresso exports jumped +39% y/y to 88,000 MT and that Jan-Nov espresso exports rose +14.8% y/y to 1.398 MMT.

Elevated Vietnamese espresso provides are bearish for costs.  Vietnam’s 2025/26 espresso manufacturing is projected to climb +6% y/y to 1.76 MMT, or 29.4 million baggage, a 4-year excessive.  Additionally, the Vietnam Espresso and Cocoa Affiliation (Vicofa) stated on October 24 that Vietnam’s espresso output in 2025/26 can be 10% greater than the earlier crop 12 months if climate circumstances stay favorable.   Vietnam is the world’s largest producer of robusta espresso.

Indicators of tighter international espresso provides are supportive of costs, because the Worldwide Espresso Group (ICO) on November 7 reported that international espresso exports for the present advertising and marketing 12 months (Oct-Sep) fell -0.3% y/y to 138.658 million baggage.

The USDA’s Overseas Agriculture Service (FAS) bi-annual report on December 18 projected that world espresso manufacturing in 2025/26 will improve by +2.0% y/y to a document 178.848 million baggage, with a -4.7% lower in arabica manufacturing to 95.515 million baggage and a +10.9% improve in robusta manufacturing to 83.333 million baggage.  FAS forecasted that Brazil’s 2025/26 espresso manufacturing will decline by -3.1% y/y to 63 million baggage and that Vietnam’s 2025/26 espresso output will rise by 6.2% y/y to a 4-year excessive of 30.8 million baggage.  FAS forecasts that 2025/26 ending shares will fall by -5.4% to twenty.148 million baggage from 21.307 million baggage in 2024/25. 

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