Coffee Prices Ease as Markets Bet on Bigger 2026/27 Harvests

Coffee prices have softened since April as markets shift their focus from geopolitical risk and high energy costs toward an improving global supply outlook led by Brazil, while inventories remain low but more stable.

After a sharp rally earlier in the season, the coffee complex has entered a corrective phase. The latest data show the ICO composite index edging lower in April, with robusta leading the decline and arabica following more moderately. Expectations of a significantly larger 2026/27 Brazilian crop and roughly 10% higher global production are now the dominant drivers, even as freight, fuel and fertilizer costs stay elevated. Futures have recently seen a modest technical rebound, but sentiment remains sensitive to harvest progress in Brazil and persistent tensions in the Strait of Hormuz that keep logistics and energy under pressure.

Prices

The ICO composite indicator price averaged 266.24 US cents/lb in April, down 2.7% month-on-month, confirming a pause in the prior bull run. All major coffee groups weakened, with robusta showing the sharpest adjustment.

Robusta prices fell about 6.9% in April, while arabica segments declined between 0.9% and 2.1%. This aligns with exchange data showing London robusta futures under heavier pressure than New York arabica as markets re-price supply risks.

In more recent trading, ICE arabica futures for nearby July 2026 rebounded to around 270 US cents/lb on 19 May after touching the lowest levels in over a year, as short-covering and roaster buying emerged at lower price levels. On an approximate basis, this equates to about 6.0–6.3 EUR/kg, keeping prices well below last year’s extremes but still historically high.

Supply & Demand

The current price correction is primarily supply-driven. Market participants increasingly prioritize improving production prospects over geopolitical risks. The global coffee crop for the current year is expected to expand by close to 10% year-on-year, easing the tightness that dominated previous seasons.

Brazil remains the key swing factor. Production there is projected to rise by roughly 14–15% in the 2026/27 season, reflecting better yields and a recovery in both arabica and robusta output. These expectations are being priced in even before the crop is fully harvested, amplifying downside pressure on prices relative to early-2026 highs.

On the demand side, consumption growth continues but at a more moderate pace amid still-high retail prices and broader macro uncertainty. Elevated energy and shipping costs, partly linked to conflict in the Middle East and disruption around the Strait of Hormuz, maintain upward pressure on delivered prices to roasters, even as green coffee benchmarks have eased.

Fundamentals & Costs

Despite improving supply prospects, global coffee inventories remain historically low, though they have recently stabilized. This combination of low but no longer falling stocks and better forward production helps explain the more measured correction rather than a full price collapse.

Input costs remain a key constraint. From late February to late April, Brent crude oil surged from roughly 73 to 114 USD/bbl, increasing fuel and freight expenses for exporters. Fertilizer prices are also trending higher, raising production costs for growers and potentially limiting how far farm-gate prices can fall without curbing future supply.

For now, the market appears willing to look through these cost pressures because the expected volume increase from Brazil and other origins is substantial. However, the cost structure sets a relatively firm floor under prices: if futures fall too far, grower margins would be squeezed, encouraging producers to slow sales and thereby tightening nearby availability.

Weather & Crop Outlook

Weather in Brazil, the dominant producer, remains broadly supportive of a larger upcoming crop. Recent assessments highlight generally favorable, drier conditions in key robusta-producing Espírito Santo and low-risk weather across major coffee states, aiding harvest progress and post-harvest drying.

The main risk to the bullish supply narrative would be a late-season weather shock reducing yields or quality. At this stage, however, no widespread adverse pattern is evident, and previous heavy rains earlier in the year have largely transitioned toward more normal to dry harvest-time conditions.

Trading Outlook

• Bias: Slightly bearish to range-bound in the short term, as expectations of a 10% global output increase and a 14–15% jump in Brazilian production cap rallies.
• Roasters/Buyers: Consider extending coverage on price dips, especially if arabica in EUR/kg revisits the lower end of the recent 5.9–6.3 EUR/kg band, while monitoring freight and energy surcharges.
• Producers: Gradual forward selling into strength may be prudent, given still historically high price levels and ample crop prospects, but maintain some unpriced volume in case of weather or logistics shocks.
• Speculators: Favor a sell-on-rallies approach, with tight risk management around geopolitical headlines and any signs of weather-related downgrades in Brazilian or global crop estimates.

3-Day Price Indication (EUR)

Given the recent rebound from oversold levels and still-bearish supply narrative, coffee futures are likely to trade sideways with a slight downward bias over the next three sessions.