Arabica Coffee Falls 2.3% as USDA Record Crop Forecast Accelerates Speculative Selling
Arabica and robusta coffee futures extended their weekly losses on Thursday, 23 July, as speculative selling intensified following a bearish global production forecast from the United States Department of Agriculture. Progress in Brazil’s harvest, weakness in the Brazilian real and deteriorating technical signals added to the pressure.
The September 2026 arabica contract on ICE Futures US closed at 309.40 cents per pound, down 725 points, or 2.29%. December also lost 725 points, settling at 296.45 cents per pound. September remains above the psychologically important 300-cent level, but Thursday’s decline confirmed that sellers have regained control following the recent period of short covering.
The session was highly volatile. September initially advanced above 320 cents per pound before selling orders intensified and reversed the market sharply lower. The contract subsequently traded down to 308.25 cents, leaving it close to the bottom of the day’s range at the close.
The absence of a meaningful buying response was particularly notable. Selling has now dominated the market for several consecutive sessions, while speculative liquidation appears to be gaining momentum as technical indicators weaken.
USDA Forecasts Record Global Coffee Production
The main fundamental catalyst was the USDA’s July Coffee: World Markets and Trade report, which projected global coffee production at a record 189.7 million 60-kilogram bags in 2026/27. That would represent an increase of 10.8 million bags from the previous season.
The expansion is expected to be driven primarily by record or larger harvests in Brazil, Vietnam, Ethiopia and Uganda, more than offsetting projected declines in India and Indonesia. World green-coffee exports are forecast to increase by 11.9 million bags to a record 131.4 million, while global consumption is expected to reach a record 179.7 million bags.
Despite the projected increase in demand, production would exceed consumption by approximately 10 million bags under the USDA figures. Global ending stocks are therefore forecast to rise for a second consecutive season, reaching 26.3 million bags.
Brazil is central to the USDA’s more bearish outlook. The country’s combined arabica and robusta production is projected at a record 71.9 million bags, an increase of 8.9 million from 2025/26.
Arabica production is expected to rebound by 9.5 million bags to 47.5 million, supported by improved rainfall during flowering and favourable crop development in Minas Gerais. Brazilian robusta output, however, is projected to fall by 600,000 bags to 24.4 million following the previous season’s record harvest.
The USDA’s projection created additional selling pressure because it reinforced expectations that the current global supply deficit could transition towards a more balanced or surplus market. However, private crop estimates remain widely dispersed, and many traders continue to question whether Brazil can deliver production at the upper end of current forecasts.
Brazilian Harvest Progress Pressures New York
The advancing Brazilian harvest provided another bearish influence. Harvesting was delayed earlier in the season, but activity is gradually gaining momentum as weather conditions become more favourable.
A faster harvest increases the volume of coffee available for sale and allows Brazilian producers and exporters to expand hedging activity on the New York exchange. A stronger US dollar against the Brazilian real can amplify this pressure by increasing the local-currency value received for dollar-denominated coffee.
Nevertheless, the Brazilian crop is not free of risk. Reports of cherries falling from trees during June have raised concerns about quality deterioration, particularly when beans remain on the ground before collection. The potential return of rain to central and southern producing areas could also complicate harvesting and drying, depending on the intensity and duration of precipitation.
The market is therefore trading a conflict between improving near-term availability and continuing uncertainty over the final size and quality of the crop.
Brazilian physical-market activity remained limited during Thursday’s decline. Sellers largely stayed on the sidelines rather than accepting lower futures-based prices, with good-quality coffee in southern Minas Gerais estimated at approximately R$1,780 per 60-kilogram bag.
Brazilian export availability also remains relatively constrained following last season’s lower crop and substantial earlier shipments. Cecafé reported that Brazil exported 38.46 million bags during the 2025/26 crop year, a decline of 15.7% from the previous season. Exports during the first half of 2026 reached 17.83 million bags, down 8.3% year on year.
Robusta Extends Weekly Decline
Robusta futures in London followed arabica lower. The September contract declined by $88, or 2.32%, to $3,708 per tonne, while November fell by $62 to $3,699 per tonne.
September briefly approached the important $3,700 benchmark but did not establish a decisive break below it. The spread between September and November narrowed to only $9 per tonne, indicating that the nearby market’s previous supply premium has weakened considerably.
The London market was also dominated by technical liquidation, with limited evidence of aggressive commercial buying. However, the robusta supply outlook remains more complicated than the arabica balance.
Brazilian conillon production is entering the market, but a considerable proportion is being absorbed domestically. At the same time, major Asian origins remain between harvests, with more substantial new-crop availability not expected until later in the year.
The USDA expects global robusta production to decline slightly in 2026/27, even as arabica production rises strongly. Indonesia’s crop is forecast to fall by 1 million bags to 11.4 million because excessive rainfall affected fruit formation and reduced yields in southern Sumatra and Java.
This divergence could eventually provide greater support to London than New York, particularly if Brazilian conillon exports fail to compensate fully for tighter Asian availability.
Low ICE Stocks Remain a Counterweight
Certified arabica inventories continue to provide an important bullish counterargument to the USDA’s longer-term supply forecast. ICE-certified stocks were reported at 315,883 bags after declining by another 4,732 bags.
The persistently low inventory base means that the futures market remains vulnerable to renewed nearby tightness, even if production prospects for 2026/27 are improving. A large forecast crop will not immediately resolve the current shortage of exchange-certified coffee, especially if quality limitations restrict the volume that can pass ICE grading requirements.
This distinction between projected future production and immediately deliverable supply remains critical. The USDA figures are bearish for the medium-term balance, but they do not eliminate short-term logistical, quality or inventory risks.
External Markets Add Volatility
The wider macroeconomic environment also remained unsettled. Brent crude oil moved back above $100 per barrel as escalating tensions and attacks on shipping in the Middle East increased concerns about energy availability and transport routes. Higher fuel and freight costs could eventually raise expenses across the coffee supply chain, although the immediate effect on Thursday was primarily greater risk aversion across financial markets.
The United States also announced a new 12.5% tariff on Brazilian exports, citing alleged shortcomings in the enforcement of restrictions on goods produced with forced labour. The measure is scheduled to replace the temporary 10% surcharge and forms part of a wider action affecting dozens of trading partners.
The precise coffee-sector implications will depend on the final tariff classifications and applicable exemptions. The announcement was not the principal driver of Thursday’s futures decline, but it introduces another source of uncertainty for trade flows between Brazil and the United States.
Coffee Demand Remains Resilient
Although futures markets focused on expanding production, corporate results continued to indicate resilient consumer demand.
Nestlé reported first-half sales of CHF43.1 billion and group organic growth of 3.6%. Coffee was its strongest major category, delivering organic growth of 7.5%, driven primarily by Nescafé. Coffee sales reached CHF12.13 billion, compared with CHF12.02 billion during the same period of 2025.
Real internal growth in coffee was 2.9%, while pricing contributed 4.7%. The results suggest that demand has continued to expand despite the significant retail price increases implemented by manufacturers following the previous surge in green-coffee costs.
Nestlé also confirmed that it divested Blue Bottle Coffee to Centurium Capital during the first half of 2026.
