Coffee Ends the Week Higher as El Niño Risks Build Across Major Origins (21 August 2026)

Coffee futures ended Friday under pressure, although the broader weekly performance remained positive as attention increasingly shifted toward weather risks in major producing countries. El Niño is becoming one of the central themes for the 2026/27 outlook, with concerns emerging in both Vietnam and Colombia, while Brazilian producers remain cautious sellers and speculative funds continue to hold substantial long exposure in New York.

Arabica futures on ICE Futures US declined sharply during Friday's session. The December contract closed at 322.65 cents per pound, down 6.65 cents, after trading between 321.70 and 335.50 cents. March settled at 309.75 cents, losing 5.75 cents. Despite the weak close, the most active arabica contract still finished the week around 0.7% higher. London robusta followed the same direction, with November falling $108 to $3,618 per tonne and January losing $99 to settle at $3,600 per tonne.

Trading activity was relatively subdued as liquidity continued to move away from the September arabica contract following the start of the notification period. December traded across a comparatively wide intraday range, but turnover remained moderate at around 26,000 contracts. With few major new fundamental developments during the session itself, technical positioning and speculative selling played a larger role in Friday's decline.

The more important story for the coming weeks is likely to be weather. Vietnam, the world's largest robusta producer, could record a modest increase in production during the 2026/27 season as coffee areas replanted in recent years move into more stable and productive phases. Thai Nhu Hiep, vice president of the Vietnam Coffee and Cocoa Association and president and CEO of exporter Vinh Hiep, said the improvement in productivity should provide some support to national output. He referred to the USDA forecast of approximately 32 million 60 kg bags for Vietnam's 2026/27 crop, the overwhelming majority of which would be robusta.

However, improving productivity does not eliminate the climatic risk. Vietnam's Central Highlands remain vulnerable to extreme weather, particularly during important stages of flowering, fruit development and bean filling. El Niño can bring hotter and drier conditions to parts of Southeast Asia, meaning that rainfall distribution over the coming months may ultimately determine whether the expected improvement in yields is fully realised. Vietnam therefore enters the new season with two competing forces: structural gains from replanting and improved productivity on one side, and the possibility of weather-related losses on the other.

The Vietnamese coffee sector is also trying to increase the value of its exports rather than relying solely on volume. Industry participants are working with producers to develop more differentiated specialty robusta profiles, with greater emphasis on quality, origin and traceability. This could gradually strengthen Vietnam's position in higher-value segments of the coffee market and allow producers to capture a larger share of the value generated further along the supply chain.

Traceability is becoming increasingly important as Vietnam prepares for the European Union Deforestation Regulation. The country is building data infrastructure intended to connect coffee production more closely with farm-level information and geographic origin. Although the regulation creates an additional compliance burden for producers and exporters, Vietnamese industry representatives are also presenting it as an opportunity to create a more transparent and competitive supply chain. If implemented effectively, stronger traceability could eventually become a commercial advantage, particularly for buyers seeking clearer information on origin and production practices.

Weather concerns are not limited to Vietnam. Colombia is also warning that production could be affected by El Niño. The Colombian National Coffee Growers Federation expects output to decline by around 8% to approximately 12.5 million bags, compared with 13.7 million bags previously. Federation president Germán Bahamón has pointed to intense rainfall earlier in the year and the emergence of El Niño as the main threats to production.

The magnitude 7.4 earthquake that struck Colombia earlier in August caused economic and social disruption in several coffee-producing regions, but the federation does not currently consider it a major threat to national crop output. The more important risk remains the evolution of weather conditions. Colombia's role as one of the world's largest producers of washed arabica means that any substantial decline in output could have a disproportionate impact on certain segments of the physical market, even if overall global coffee availability remains adequate.

Brazil, meanwhile, continues to move significant volumes into the international market. According to Cecafé data through August 13, Brazilian coffee shipments for the month had reached around 1.16 million bags. Arabica accounted for approximately 808,000 bags, robusta for about 278,000 bags and soluble coffee for roughly 70,000 bags. If the current shipment pace continues, total August exports could approach 2.7 million bags.

Strong exports, however, should not automatically be interpreted as aggressive producer selling. Reports from Brazil continue to suggest that many growers are dissatisfied with the prices currently offered by buyers and are limiting sales to quantities needed to meet immediate financial commitments. Producers appear willing to hold coffee while waiting for greater clarity on the market outlook. Good-quality coffee in southern Minas Gerais was estimated at around R$1,940 per 60 kg bag.

This distinction between available coffee and coffee actually offered to the market is increasingly important. Brazil may possess substantial physical supply, but producer reluctance can still tighten nearby availability and reduce the volume that reaches exporters and commercial buyers at prevailing prices. In a market already sensitive to weather, restrained producer selling can reinforce price volatility.

Speculative positioning remains another important component of the current structure. The latest CFTC report, covering positions through August 18, showed large speculative participants holding around 30,706 net-long arabica contracts. This consisted of approximately 48,621 long positions and 17,915 shorts, representing an increase of nearly 13% in net bullish exposure.

The expansion in speculative length indicates that funds remain positioned for relatively firm coffee prices despite recent volatility. Such positioning can strengthen rallies if weather concerns worsen and attract additional buying. At the same time, it creates downside vulnerability if the expected fundamental risks fail to materialise, since a rapid reduction in long exposure could accelerate declines.

Certified arabica stocks on ICE Futures US remain another supportive element. Inventories declined by a further 386 bags to 227,992 bags. These stocks represent only a small portion of global coffee supply, but they are important because they consist of coffee deliverable against ICE futures contracts. Their historically low level means that the exchange has a relatively limited inventory buffer if physical conditions tighten unexpectedly.

Low certified stocks, producer selling resistance and persistent weather uncertainty help explain why arabica prices remain highly sensitive even while Brazil continues exporting sizeable volumes. The market does not necessarily face an immediate shortage, but its ability to absorb an unexpected production problem is more limited than headline global supply figures alone might suggest.

Peru is also becoming a more significant participant in the regional coffee story. Coffee exports reached a record value of approximately $1.796 billion in 2025, while exports of unroasted, non-decaffeinated coffee during the first half of 2026 were valued at around $325 million, approximately 7.7% higher than during the same period last year. More than 223,000 families participate in Peru's coffee value chain, with small producers forming the core of the sector. The country's diverse varietal base, including Caturra, Typica, Bourbon, Catimor, Pache and Geisha, also provides opportunities for further differentiation in specialty markets.

For now, the global coffee market does not appear to be confronting an immediate supply shock. Brazilian exports remain active, Vietnam may benefit from improving productivity and the transition away from the September futures contract should gradually reduce some of the technical distortions seen in recent sessions. Nevertheless, the market is increasingly trading expectations about future production rather than simply current availability.

Vietnam may be entering the season with better productive potential, but El Niño could reduce those gains. Colombia is already anticipating lower output and identifies weather as the main threat. Brazilian producers continue to restrict discretionary selling, exchange-certified stocks remain exceptionally low and investment funds are maintaining substantial bullish exposure.

These conditions leave coffee vulnerable to sharp moves in either direction. Friday's decline was largely associated with positioning, contract transition and the absence of new immediate fundamental catalysts, but it does not remove the underlying production risks developing across major origins.