Arabica Coffee Futures Halt Rally

Arabica coffee futures extended their decline, trading around $3.1 per pound, the lowest level since August 6, amid the prospect of increased coffee supply in Brazil. More than 90% of the harvest has now been completed, helped by drier weather, with the country heading for a record crop of around 75 million bags. The prospect of additional supply is particularly relevant against a backdrop of dwindling inventories, potentially easing some of the tightness in the market. Reports that some Brazilian warehouses are nearing capacity also pressured prices, as limited storage space could force farmers to sell more beans. However, erratic weather and growing climate risks continue to cloud the outlook for next year’s crop. Fears of a potentially strong El Niño persisted, as the weather pattern could delay rainfall during the critical September-October flowering period.

Arabica coffee futures eased toward $3.2 per pound, down from a recent one-month peak above $3.4 per pound, partly due to profit-taking as funds and investors reduced long positions following the recent rally. Reports that some Brazilian warehouses are nearing capacity also pressured prices, as limited storage space could force farmers to sell more beans. Nevertheless, the market remained supported by tight near-term availability and historically low certified stocks. In top producer Brazil, the harvest is now more than 90% complete, with drier weather supporting fieldwork, though erratic weather continues to raise concerns over next year’s crop. Moreover, fears of a potentially strong El Niño persisted, as the weather pattern could delay rainfall during the critical September-October flowering period, raising risks for next year’s production.

Arabica coffee futures traded around $3.4 per pound, close to their highest since July 9, supported by tight inventories and persistent supply concerns. ICE-certified Arabica stocks continued to decline and are now near a 26-year low, leaving the market vulnerable to potential supply shocks. Brazil is heading for a record harvest of around 75 million bags, although harvesting has progressed more slowly than a year ago. Drier conditions are now allowing producers to accelerate fieldwork. However, the quality of part of the new Arabica crop remains a concern, with reports pointing to weaker cup quality and smaller bean sizes, which could limit the pace at which inventories are replenished. Meanwhile, El Niño remains an upside risk, as the weather pattern could delay rainfall during the September-October flowering period, threatening Brazil's next crop. The US Climate Prediction Center predicts the current El Niño to be among the strongest in more than 75 years.