São Paulo, July 23, 2025 (qw) – Global coffee markets rebounded sharply on Tuesday, as forecasts of a cold front threatening Brazil’s key coffee-growing regions triggered concerns over crop damage and renewed volatility in prices.

September contracts for arabica coffee closed up by 1.51%, while robusta futures surged 3.20%, reversing earlier losses as traders responded to a new weather alert. Brazilian meteorological agency Climatempo warned that a significant cold front is expected to sweep across the country’s coffee belt later this week, potentially bringing frost conditions capable of harming maturing crops.

This potential disruption in Brazil—the world’s largest producer of arabica coffee—was enough to drive speculative buying and short covering in both markets.

Harvest Pressure Gives Way to Weather Risk

Earlier in the day, both arabica and robusta futures had hit new lows. September robusta dropped to a contract low, while near-term robusta futures fell to their lowest levels in over a year. Market sentiment had been weighed down by a rapid harvest in Brazil.

According to data from Safras & Mercado, Brazil’s 2025/26 coffee harvest was 77% complete as of July 16, ahead of both last year’s pace (74%) and the five-year average (69%). The breakdown reveals that 93% of the robusta crop and 67% of the arabica crop had been harvested.

In addition, Brazil’s largest coffee cooperative, Cooxupé, reported that its members’ harvest was 59% complete by July 18. Such fast-paced harvesting had exerted downward pressure on prices earlier in the week.

Inventory Trends Paint Mixed Picture

While robusta prices have been under pressure from increasing inventory levels, with ICE-monitored stocks climbing to an 11.5-month high, arabica inventories told a different story—falling to a three-month low of just over 807,000 bags. This divergence has contributed to differing market dynamics for the two main coffee types.

Analysts also point to an unusually large short position by hedge funds in robusta futures. According to ICE Futures Europe, funds increased their net-short positions to the highest level in two years by mid-July. This positioning raises the possibility of a short-covering rally if weather conditions continue to deteriorate.

Drought, Tariffs, and Trade Data Add Complexity

The threat of frost isn’t the only weather concern. Brazil’s Minas Gerais region, responsible for over 30% of the country’s arabica output, received no rainfall in the week ending July 19, according to Somar Meteorologia. Prolonged dryness could further stress crops during critical development stages.

Meanwhile, geopolitical factors are adding to market uncertainty. A recent announcement by former President Donald Trump revealed plans to impose a 50% tariff on U.S. imports from Brazil, effective August 1. This raised fears of possible disruptions to arabica coffee flows into the U.S. market.

On the export front, Brazil’s total green coffee shipments in June fell 31% year-on-year to 2.3 million bags, according to Cecafé. Arabica exports dropped 27%, while robusta exports plummeted 42%.

Vietnam’s Role in the Global Balance

In Vietnam, the world’s largest producer of robusta coffee, supply signals remain mixed. After a severe drought, the country’s 2023/24 crop was down 20% year-on-year, marking a four-year low. The Vietnam Coffee and Cocoa Association has since revised its 2024/25 output forecast downward to 26.5 million bags, from a previous estimate of 28 million.

Despite these challenges, Vietnam’s January–June 2025 exports were up 4.1% year-on-year, indicating a potential recovery in trade flow.

USDA Forecast: Record Production, Yet Arabica Deficit Looms

On June 25, the U.S. Department of Agriculture (USDA) released its biannual report projecting global coffee production to reach a record 178.68 million bags in 2025/26—a 2.5% increase over the previous year. While robusta output is expected to rise by 7.9%, arabica production is forecasted to decline by 1.7%.

Despite this headline growth, the ending stock estimate for the marketing year is relatively tight at 22.82 million bags, up from 21.75 million in 2024/25. Moreover, coffee trader Volcafe projects an arabica supply deficit of 8.5 million bags for 2025/26—widening the gap from the previous year and marking the fifth consecutive annual shortfall for arabica beans.

Outlook

As frost threats loom and supply tensions intensify, traders and industry watchers remain on high alert. While global production is forecast to hit record highs, regional risks—from Brazilian weather to geopolitical barriers—are complicating an already delicate balance.

The coming weeks will be critical for determining the real impact of Brazil’s weather patterns and trade policies on global coffee flows.