September arabica coffee (KCU25) on Monday closed up +15.35 (+5.36%), and September ICE robusta coffee (RMU25) closed up +303 (+9.42%).

Coffee prices soared on Monday, with arabica coffee climbing to a 2-week high.  Excessive dryness in Brazil sparked fund short covering in coffee futures Monday after Somar Meteorologia reported that Brazil's largest arabica coffee-growing area, Minas Gerais, received no rain during the week ended July 12.

Arabica coffee also has some carryover support from last Wednesday, when President Trump said he would impose 50% tariffs on US imports from Brazil, effective August 1.  That threat caused concern that coffee supplies could be disrupted from Brazil, the world's largest producer of arabica coffee.

Robusta coffee was under pressure and sank to a 14-month nearest-futures low Monday before recovering due to signs of increased coffee supplies from Vietnam.  Last Monday, the Vietnam National Statistics Office reported that Vietnam's Jan-Jun 2025 coffee exports were up +4.1% y/y to 943,000 MT.

Last Tuesday, Sep arabica coffee posted a contract low, and last Monday, the July (N25) nearest-futures contract fell to a 7.5-month low, as the advancing coffee harvest in Brazil weighed on prices.  Safras & Mercado reported last Friday that Brazil's 2025/26 coffee harvest was 69% complete as of July 9, ahead of last year's comparable level of 66% and the 5-year average of 62%.  The breakdown showed that 88% of the robusta harvest and 58% of the arabica harvest were complete as of July 9.  Meanwhile, Brazil's Cooxupe coffee co-op on Tuesday reported that the group's coffee harvest was 40% complete as of July 4, compared with 52% completed at the same time last year.   Cooxupe is Brazil's largest coffee cooperative and Brazil's largest exporter group.

Coffee prices have retreated over the past two months as the outlook for abundant coffee supplies undercut prices.  On June 25, the USDA's Foreign Agricultural Service (FAS) forecasted that Brazil's 2025/26 coffee production will increase by 0.5% y/y to 65 million bags and that Vietnam's 2025/26 coffee output will rise by 6.9% y/y to a 4-year high of 31 million bags.  Brazil is the world's largest producer of arabica coffee, and Vietnam is the world's largest producer of robusta coffee.

Coffee prices are also under pressure from an increase in ICE-monitored inventories after robusta coffee inventories jumped to a  9.75-month high of 5,477 lots Monday.  Also, ICE-monitored arabica coffee inventories rose to a 5.25-month high of 892,468 bags on May 27 and were moderately below that high at 828,678 bags as of Monday.

Due to drought, Vietnam's coffee production in the 2023/24 crop year decreased by -20% y/y to 1.472 MMT, the smallest crop in four years.  Also, Vietnam's General Statistics Office reported that 2024 Vietnam coffee exports fell by -17.1% y/y to 1.35 MMT.   Additionally, the Vietnam Coffee and Cocoa Association reduced its 2024/25 Vietnam coffee production estimate to 26.5 million bags on March 12, down from a December estimate of 28 million bags.

The USDA's biannual report, released on June 25, was bearish for coffee prices.  The USDA's Foreign Agriculture Service (FAS) projected that world coffee production in 2025/26 will increase by +2.5% y/y to a record 178.68 million bags, with a -1.7% decrease in arabica production to 97.022 million bags and a +7.9% increase in robusta production to 81.658 million bags.  The USDA's FAS forecasts that 2025/26 ending stocks will climb by +4.9% to 22.819 million bags from 21.752 million bags in 2024/25.

For the 2025/26 marketing year, Volcafe projects a global 2025/26 arabica coffee deficit of -8.5 million bags, wider than the -5.5 million bag deficit for 2024/25 and the fifth consecutive year of deficits.