Coffee and sugar prices are extending their rally due to adverse weather conditions fueling supply fears. Heavy rains in Brazil, specifically 31.3 mm in Minas Gerais (1,956% of the historical average) in the week ending June 28, are delaying the country's coffee harvest and raising concerns about crop quality. This has led to September Arabica coffee (KCU26) climbing by +1.37% and September ICE Robusta coffee (RMU26) dropping by -2.04% today, though earlier in the past two weeks, robusta reached a 4.5-month high and arabica a 1.5-month high.
Investment funds are also shifting to a bullish stance, increasing net long positions by over 49% to nearly 21,000 contracts as of June 23, after five weeks of reductions. This reflects growing concerns about crop progress in Brazil and potential climate risks. At the close of trading on June 30, Arabica prices rose 6.7% to $6,535 per ton, and Robusta prices increased 2.6% to $3,658 per ton, with prices rising in 11 of the last 15 trading sessions. The value of coffee trading on the Vietnam Commodity Exchange increased by over 52%, attracting significant investment.
ICE coffee inventories have been trending lower, with Arabica inventories falling to a 2.25-year low of 380,534 bags, while Robusta inventories, after hitting a 2-year low in May, jumped to a 2.75-month high of 4,053 lots. Furthermore, concerns about an impending El Niño weather pattern are bullish for prices, as the US National Oceanic and Atmospheric Administration (NOAA) estimates a 67% probability of a "Super El Niño" this year. This could delay rains in Brazil during the tree flowering period in September and October, impacting the 2026/27 coffee crop. However, soaring robusta exports from Vietnam, projected to climb 6% year-over-year to 1.76 MMT (29.4 million bags) in 2025/26, are seen as a bearish factor for Robusta prices.
