Weather Risks and Tight Supply Offset Friday's Profit-Taking
Coffee futures ended Friday's trading session under pressure as investors took profits following two consecutive weeks of strong gains. Arabica futures in New York and Robusta futures in London both retreated during the session, but the broader market picture remains largely unchanged. The correction appeared to be driven primarily by technical selling rather than any deterioration in market fundamentals, with traders continuing to focus on weather conditions in Brazil, historically low certified stocks, and uncertainty surrounding global coffee supplies.
On ICE Futures US, the September 2026 Arabica contract settled at 273.20 cents per pound, down 320 points (1.16%), after trading within a relatively wide intraday range between 269.85 and 278.35 cents/lb. December futures declined 250 points to 260.90 cents/lb. In London, September 2026 Robusta futures closed US$35 lower at US$3,627 per tonne, while November futures finished at US$3,570 per tonne, down US$23. Despite Friday's decline, both Arabica and Robusta still posted weekly gains, highlighting that the underlying upward momentum remains intact.
The Brazilian harvest continues to dominate market sentiment. Unseasonably persistent rainfall across southeastern Brazil, particularly in southern Minas Gerais, Alta Mogiana and other key Arabica-producing regions, has slowed harvesting operations during what is normally one of the driest periods of the year. Besides delaying fieldwork, the excessive moisture has complicated the drying process, increased production costs and raised concerns about bean quality. Market participants remain particularly attentive to the potential impact on premium-grade coffee, as prolonged rainfall during harvest can significantly reduce quality and limit the availability of higher-grade beans.
Weather forecasts suggest that rainfall should ease temporarily over the weekend, allowing harvesting to resume in some areas. However, meteorological models indicate that another weather system is expected to move across southeastern Brazil early next week, bringing additional rainfall back to major producing regions. While the moisture is beneficial for long-term soil conditions, its timing during the peak harvest period continues to create uncertainty regarding both production efficiency and final crop quality. At the same time, traders remain vigilant for any episodes of unusually low temperatures as Brazil moves deeper into winter, with frost risks continuing to represent one of the market's biggest potential catalysts.
One of the strongest bullish pillars remains the exceptionally tight level of certified Arabica coffee stocks. ICE certified inventories declined by another 3,107 bags on Friday to 382,084 bags, extending a multi-week downward trend. Inventories are now less than half the level recorded one year ago, when stocks stood at 850,381 bags, representing an annual decline of more than 468,000 bags. The continued drawdown demonstrates that the arrival of Brazil's new crop has not yet translated into a meaningful replenishment of exchange-certified inventories, reinforcing concerns over the availability of high-quality physical coffee.
The physical market in Brazil remains notably quiet despite the ongoing harvest. Producers continue to market their coffee cautiously, with many growers reluctant to sell at current price levels, believing values could strengthen further if weather issues persist and certified inventories remain tight. As a result, physical trading volumes continue to run below seasonal norms, limiting nearby supply available to exporters and international buyers. Brazilian coffee exports during June have also remained slightly below the pace recorded in May, reflecting this restrained selling activity.
Outside Brazil, the Robusta market continues to receive support from developments in Asia. Vietnam, the world's largest Robusta producer, continues to experience slow domestic trading, with producers showing limited selling interest. Meanwhile, expectations for a smaller harvest in Indonesia continue to raise concerns about Robusta availability over the coming months. Adding to market uncertainty, weather forecasts point to another significant heat wave across parts of Vietnam. After last year's weather-related production losses, traders remain highly sensitive to any renewed weather stress that could threaten the upcoming crop.
The latest Commitment of Traders report also highlighted growing speculative interest in coffee. Large managed funds increased their net long position by 127%, holding 10,724 net long contracts, reflecting increased confidence that the combination of tight inventories, weather uncertainty and constrained supply could continue supporting prices. While speculative positioning has become more constructive, Friday's sell-off illustrated that periods of profit-taking remain likely following sharp advances.
From a technical perspective, Friday's decline did little to alter the broader chart structure. September Arabica continues to trade comfortably above the psychologically important 270 cents per pound level, with resistance seen near 277.75, 282.30 and 286.25 cents, while support is located around 269.25, 265.30 and 260.75 cents. In London, September Robusta successfully defended the important US$3,600 per tonne level, suggesting buyers remain active on price weakness.
Another theme gradually attracting greater attention is the implementation of the European Union's Deforestation Regulation (EUDR), scheduled to come into force later this year. The regulation will require exporters to prove that coffee entering the European market has not been produced on recently deforested land. Market participants increasingly believe that compliance challenges could temporarily restrict supplies from certain producing regions, adding another potential source of tightness to an already constrained global market.
