Coffee Prices Drop Amid Regulatory Changes and Supply Concerns
On a recent Wednesday, both Arabica Coffee and January ICE Robusta Coffee experienced declines, closing at -3.60 (-0.94%) and -46 (-1.01%) respectively. This drop in coffee prices followed the European Parliament’s decision to extend deforestation laws for another year, which is expected to maintain a steady supply of coffee around the globe. The EU’s new regulation, referred to as EUDR, is designed to combat deforestation in nations exporting crucial commodities like coffee, cocoa, and soy into the EU. The delay in implementing these regulations means that EU countries can continue importing agricultural goods from deforested areas in parts of Africa, Indonesia, and South America.
Interestingly, the decline in coffee prices was somewhat mitigated by severe weather conditions threatening coffee production. For instance, in Brazil, the Arabica variety is currently favored due to dry conditions. According to Somar Meteorologia, Minas Gerais, the largest Arabica-growing region in Brazil, received only 26.4 mm of rain last week, which is just 49% of the usual amount. In contrast, predictions of heavy rainfall in Vietnam’s Dak Lak province—its primary coffee region—are causing concern about delays in the Robusta harvest.
Another factor bolstering coffee prices is the drop in iced coffee inventories. Tariffs imposed by the U.S. on Brazilian coffee imports have led to a significant reduction in stock. As of last Thursday, the Arabica inventory monitored by ICE fell to 398,645 bags, marking a 1.75-year low. On Wednesday, the Robusta inventory was down to 4,911 lots, a low not seen in over six months. The U.S. imports a substantial portion of its unroasted coffee from Brazil, so these tariffs have led U.S. buyers to shy away from new contracts, tightening supplies even further. From August to October, coinciding with President Trump’s tariffs, the U.S. purchased 983,970 bags of Brazilian coffee, a staggering 52% decline from the same timeframe last year.
Last Friday, Arabica coffee fell to a seven-week low after President Trump signed an executive order exempting Brazilian food products from tariffs, which includes a 40% tariff on Brazilian coffee.
However, a bearish forecast from StoneX last Wednesday predicted that Brazil would produce 70.7 million bags of coffee in the 2026/27 marketing year, including 47.2 million bags of Arabica, reflecting a +29% increase compared to the previous year.
Prices are also under pressure as Vietnamese coffee supply is expected to grow. The National Bureau of Statistics of Vietnam reported that coffee exports from January to October 2025 rose 13.4% year-on-year to 1.31 million metric tons. Production estimates for 2025/26 suggest an increase of 6% year-on-year to 1.76 million metric tons or about 29.4 million bags, potentially the highest output in four years. Moreover, the Vietnam Coffee and Cocoa Association (Vicofa) indicated that, if conditions allow, production could rise by 10% compared to last year. Vietnam is the world leader in Robusta coffee production.
Despite the bearish sentiment, signs of tight global supply are offering some support to prices. The International Coffee Organization (ICO) noted that global coffee exports for the current marketing year (October-September) decreased by 0.3% year-on-year to 138,658,000 bags.
Additionally, prices have received support from Brazil’s harvest forecasting agency, Conab, which on September 4th revised its Arabica coffee harvest estimate for 2025 down to 35.2 million bags, a 4.9% decrease from its previous May estimate of 37 million bags. Overall, Conab also lowered Brazil’s total coffee production forecast for 2025 to 55.2 million bags, down 0.9% from its May figure of 55.7 million bags.
Looking ahead, the USDA Foreign Agriculture Service (FAS) anticipated that global coffee production for 2025/26 would hit a record 178.68 million bags, a 2.5% year-on-year increase. Arabica production is expected to decline by 1.7% to 97.022 million bags, while Robusta is predicted to rise by 7.9% to 81.658 million bags. Brazil’s coffee production is slated to grow by 0.5% to 65 million bags, with Vietnam expected to see a 6.9% increase to reach 31 million bags, also a four-year high. Ending stocks for 2025/26 are predicted to rise by 4.9% to 22,819,000 bags from 21,752,000 in 2024/25.
