September arabica coffee (KCU25) on Tuesday closed up +12.60 (+3.67%), and September ICE robusta coffee (RMU25) closed up +255 (+6.14%).

Coffee prices extended their sharp two-week-long rally Tuesday, with arabica coffee posting a 2.25-month high and robusta posting a 2-month high.  Weather concerns in Brazil are underpinning coffee prices.  On Monday, Somar Meteorologia reported that Brazil's largest arabica coffee-growing area, Minas Gerais, received no rain during the week ended August 16.  

Coffee prices also have support on concerns about tighter US coffee supplies, as American buyers are voiding new contracts on purchases of Brazilian coffee beans due to the 50% tariffs imposed on Brazilian exports to the US.  That tightens the coffee supply in the US market since about a third of unroasted coffee comes from Brazil.

Coffee prices have moved higher over the past two weeks after Brazil's Trade Ministry reported on August 6 that Brazil's July unroasted coffee exports fell -20.4% y/y to 161,000 MT.  In related bullish news released last Wednesday, Brazil's green coffee exports in July fell -28% y/y to 2.4 million bags, according to exporter group Cecafe.  Cecafe said July arabica exports fell -21% y/y, while robusta exports plunged -49% y/y.  Cecafe said Brazil's July coffee exports fell -28% to 2.7 million bags, and that coffee shipments during Jan-July fell -21% to 22.2 million bags.

A decline in ICE coffee inventories is supporting coffee prices.  ICE-monitored arabica inventories fell to a 1.25-year low of 726,661 bags last Thursday, before recovering slightly to 736,573 bags on Tuesday.  Also, ICE robusta coffee inventories fell to a 3-week low on Tuesday of 6,749 lots, mildly below the 2-year high of 7,029 lots posted on July 28.

The ongoing Brazilian coffee harvest is bearish for coffee prices.  Brazil's Cooxupe coffee co-op announced Tuesday that the harvest among its members was 86.1% complete as of August 15.  Cooxupe is Brazil's largest coffee cooperative and Brazil's largest exporter group.  In related news, Safras & Mercado reported August 8 that Brazil's overall 2025/26 coffee harvest was 94% complete as of August 6, ahead of the comparable level of 92% last year.  The breakdown showed that 99% of the robusta harvest and 91% of the arabica harvest were complete as of August 6.  

As a bearish factor, the International Coffee Organization (ICO) reported August 6 that global June coffee exports rose +7.3% y/y to 11.69 million bags.  However, cumulative Oct-Jun coffee exports were down -0.2% y/y at 104.14 million bags.

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.  By contrast, the Vietnam National Statistics Office reported last Tuesday that Vietnam's Jan-Jul 2025 coffee exports were up +6.9% y/y to 1.05 MMT.

The USDA's Foreign Agriculture Service (FAS) projected on June 25 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.  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.  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.  However, Volcafe is projecting 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.