Strengthening Of The Brazilian Real Causes Coffee Price Hikes – CoffeeTalk

Coffee prices are rising today due to a rally in the Brazilian real, which has sparked short covering in coffee futures. The real rose to a 1-1/2 week high against the dollar, discouraging export selling from Brazil’s coffee producers. On Tuesday, arabica coffee fell to a 1-3/4 month low, and robusta dropped to a 7-month low as harvest pressures in Brazil undercut coffee prices. Brazil’s 2025/26 coffee harvest was 20% complete as of May 28, just below the five-year average of 21% for the same time of year.

Coffee prices have been under pressure over the past month due to concerns about higher coffee production and ample supplies. The USDA’s Foreign Agricultural Service (FAS) forecast that Brazil’s 2025/26 coffee production will increase by 0.5% year-over-year (y/y) to 65 million bags and that Vietnam’s 2025/26 coffee output will rise by 6.9% y/y to 31 million bags. An increase in ICE coffee inventories is undercutting coffee prices. ICE-monitored robusta coffee inventories rose to an 8-1/2 month of 5,438 lots on May 30. ICE-monitored arabica coffee inventories rose to a 4-month high of 892,468 bags last Tuesday.

On the positive side for coffee prices is concern that poor weather in Brazil will reduce crop yields. Somar Meteorologia reported Monday that Brazil’s biggest arabica coffee growing area of Minas Gerais received no rain in the week ended May 31. Smaller coffee exports from Brazil are bullish for prices. Cecafe reported that Brazil’s April green coffee exports fell -28% y/y to 3.05 million bags, and Jan-Apr coffee exports fell -15.5% y/y to 13.186 million bags.

Robusta coffee has support from reduced robusta production. Due to drought, Vietnam’s coffee production in the 2023/24 crop year dropped by -20% to 1.472 MMT, the smallest crop in four years. The Vietnam Coffee and Cocoa Association cut its 2024/25 Vietnam coffee production estimate to 26.5 million bags from a December estimate of 28 million bags. Rabobank predicted that Brazil’s 2025/26 robusta coffee crop would climb +7.3% y/y to a record 24.7 million bags.

The USDA’s biannual report on December 18 was mixed for coffee prices. The FAS projected that world coffee production in 2024/25 will increase +4.0% y/y to 174.855 million bags, with a +1.5% increase in arabica production to 97.845 million bags and a +7.5% increase in robusta production to 77.01 million bags.

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