Coffee Market Opens the Week on a Cautious Footing After Heavy Fund Liquidation (4/7 Септембер 2026)
The coffee market enters the new week with sentiment still fragile after a sharp correction in both arabica and robusta, although tightening conditions in several producing origins continue to provide a counterweight to the recent selling pressure.
Friday brought some stabilization after several sessions of heavy liquidation. New York December arabica recovered from an intraday low of 292.75 cents/lb to trade as high as 300.85 before settling at 295.60 cents/lb, up only 25 points on the session. The modest advance did little to change the broader picture, with the contract losing roughly 4.5% over the week.
London robusta showed a stronger recovery on Friday. November futures gained $56 to settle at $3,430/ton after trading between $3,348 and $3,464. Even after that rebound, however, the contract remained substantially below late-August levels and had lost almost 3% over the week.
Monday produced an unusual split between the two markets. ICE Futures U.S. was closed for the Labor Day holiday, leaving Friday's 295.60-cent settlement as the latest reference for December arabica. London continued trading, with November robusta surrendering part of Friday's recovery and closing at approximately $3,405/ton, down $25, or 0.7%. The contract traded between $3,369 and $3,460 during the session.
Fund liquidation accelerated the correction
The latest CFTC positioning data provide an important explanation for the speed of the recent decline in arabica.
In the futures-and-options combined report for 1 September, non-commercial traders held 45,624 long contracts against 21,801 shorts, leaving a net long position of 23,823 contracts. A week earlier, the equivalent net position stood at 30,746 contracts.
The reduction came from both sides of the book: speculative longs fell by 2,881 contracts while shorts increased by 4,042. In other words, the market was not experiencing simple profit-taking. Existing bullish exposure was being reduced at the same time that new bearish positions were being established.
Open interest also declined from 203,830 to 200,891 contracts.
More interesting was the behavior of commercial participants. Their net short exposure fell to 26,069 contracts from 33,387 a week earlier as commercial longs increased while commercial shorts declined. That means commercial participants were reducing net bearish exposure even while speculative funds were aggressively cutting their bullish positions.
Physical availability remains more complicated than the futures correction suggests
The fundamental picture is also less comfortable than the recent decline in futures might imply.
Colombia reported another weak production month. August output fell 12% year on year to approximately 1.09 million 60-kg bags, while exports declined about 10% to 1.05 million bags. January-August production was approximately 7.73 million bags, 12% below the corresponding period last year.
On a rolling 12-month basis, production fell to roughly 12.58 million bags and exports to 11.69 million bags. Weather variability and the effects of unusually wet conditions earlier in the year continue to be cited as important factors behind the decline. Current estimates point toward Colombian 2026 production of roughly 12.2-12.5 million bags.
The Colombian figures therefore provide a distinctly different signal from the price action: washed-arabica availability is not expanding.
Brazil remains the larger bearish influence. Expectations for a sizeable crop and improving availability following the harvest have encouraged selling, while uncertainty surrounding Brazilian export volumes has contributed to unusually volatile trading. The perception that more Brazilian coffee will become available has been one of the principal arguments behind the recent correction.
Consequently, the market is increasingly trading a conflict between improving Brazilian supply expectations and tighter conditions elsewhere rather than a uniformly bearish global supply story.
Vietnam remains quiet despite limited physical supply
Vietnam's domestic market has also failed to show much activity following the country's National Day holiday.
Prices in the principal Central Highlands producing regions were around VND94,200-95,000/kg at the beginning of this week, with Lam Dong toward the lower end and Dak Nong around the upper end of the range. Trading activity remains subdued, with weak purchasing interest coinciding with relatively limited producer selling.
That combination is significant. Falling prices accompanied by strong physical selling would provide a clearer bearish signal. Instead, the Vietnamese market currently appears illiquid: buyers are reluctant to chase coffee while producers and holders are not releasing substantial volumes at current levels.
The approaching 2026/27 harvest will eventually increase physical availability, but weather has now introduced an additional uncertainty.
Heavy-rain risk is developing over Vietnam
Vietnam's meteorological authorities are monitoring the possible formation of a tropical system in the South China Sea.
A tropical convergence zone is expected to develop from around 9 September. Current forecasts assign a roughly 70-80% probability that a tropical depression could form in the central South China Sea around 12-13 September, with a further 30-40% probability of the system strengthening into a tropical storm.
The interaction between this system, the convergence zone and the first weak cold-air intrusion of the season could generate widespread moderate to heavy rainfall across central Vietnam between approximately 10 and 17 September. One of the higher-probability scenarios places the main rainfall corridor from Ha Tinh southward toward Gia Lai, while the southwest monsoon is also expected to become more active across the Central Highlands.
For coffee, this is currently a risk to monitor rather than evidence of crop damage.
The main robusta harvest is still ahead, meaning several days of additional rainfall would not necessarily be negative. Adequate moisture remains beneficial for bean development. The situation would become more concerning if rainfall became excessive or persistent as cherries approach maturity, increasing disease pressure, interfering with farm access or delaying the beginning of harvesting and drying.
Indonesian volcanic eruption adds another regional risk
Indonesia has meanwhile faced a different type of disruption following a major eruption of Anak Krakatau in the Sunda Strait.
Ash from the volcano spread across parts of Java and Sumatra over the weekend, affecting aviation around Jakarta, Banten, Lampung and surrounding areas. Hundreds of flights were cancelled or rescheduled, including approximately 467 flights involving Jakarta's Soekarno-Hatta airport alone. Ash was also reported in Lampung.
For the coffee market, Lampung is the important detail. The province is one of Indonesia's principal robusta-producing and exporting regions.
There is currently no evidence that the eruption has caused material coffee-crop losses or disrupted coffee exports on a meaningful scale. The immediate implication should therefore remain limited. Nevertheless, continued ashfall or transport disruption in southern Sumatra would warrant monitoring because Indonesia remains an important source of robusta supply.
Macro conditions offered little support
Coffee also had to absorb a stronger-than-expected U.S. employment report on Friday.
The U.S. economy added 162,000 jobs in August while unemployment remained at 4.1%. Average hourly earnings increased 0.3% month on month and 3.1% year on year. The stronger labor data reduced the urgency for monetary easing and contributed to a more cautious macro environment for commodities.
However, coffee's recent movement appears to have been driven considerably more by positioning, Brazilian supply expectations and technical liquidation than by currency or macroeconomic factors alone.