GSX Monthly Coffee Report

NY Arabica fell roughly 6% from the end of April as non-commercial and index participants sold nearly 11,000 lots, predominantly by establishing new gross short positions.

KC2’s annual inversion continued to erode, finishing the month at 4%, despite a roughly 15% decline in Arabica certified stocks.

London (LDN) was broadly unchanged and held steady month-over-month in both flat price and annual inversion, supported by modest managed-money buying. The September NY/LDN arbitrage narrowed by 20 cents but remains far from historically cheap levels.

The USDA released several annual coffee reports.

Vietnam
Vietnam’s production is forecast to rise marginally, from 31.7 to 32.5 million bags in 2026/27. Key concerns include rising input costs, drought concerns associated with a developing El Niño, and an aging tree population (roughly 30%).

Colombia
Colombia’s production is expected to rebound from 12.5 to 13.4 million bags (+7.2%) as weather conditions transition from La Niña-driven excessive rainfall towards drier El Niño-type conditions.

Brazil
Released June 1, the USDA forecast Brazil’s 2026/27 coffee production at 71.9 million bags, representing a 14% increase from the 2025/26 estimate of 63 million bags (47.5 Arabica, 24.4 conilon). The report attributes the increase to the positive biennial cycle, favorable weather, rising global prices, and an expansion of cultivated area.

The forecast sits below trade consensus, which clusters at 75 million bags and above.

At the XXV International Coffee Seminar in Santos, the consensus view pointed to an excellent 2026/27 crop, tempered by the view that well-capitalized farmers remain confident in their pricing power.

ICE NY certified stocks fell by 64,000 bags in May, with draws well distributed across seven to eight origins. The largest decline came from Nicaraguan stocks in Antwerp.

Rainfall has improved somewhat in Vietnam’s Central Highlands.

The onset of El Niño further reduces Brazil’s already minimal statistical frost risk. Even so, weather remains a key focus as winter approaches. Temperatures are expected to stay favorable over the next 10 days.

Most physical differentials remain elevated. That said, Brazil natural MTGB fine cup coffee offers are softening: differentials hold at small premiums to September NY, while new crop trades around a -10ct discount to December.

Over the past year or so, most differentials have softened into and through the harvest before rebounding afterward, consistent with a structurally tight global balance sheet. As Brazil enters the bumper 2026/27 crop cycle, conilon differentials weakened sharply at first but have since retraced to positive levels.

The shift into a global surplus should rebalance Brazil’s domestic consumption between conilon and low-grade Arabica. With domestic conilon still trading at a discount of 20% or more to low-grade Arabica, however, that substitution has yet to materialize. The longer this internal realignment is delayed, the greater the potential for increased new-crop Brazilian Arabica exports.

Although destination stocks remain historically low, the approach of Brazil’s large 2026/27 harvest is likely to keep pressuring futures prices.

A potentially significant downside risk for NY is the continued erosion of the forward annual inversion, currently around 4%. There may be an inflection point at which the backwardation becomes insignificant enough to engage longer-term trend-following systems on the short side of NY. Some might argue this has already begun.

Stabilization and a potential oversold rebound would likely depend on continued selling restraint from Brazilian farmers, alongside an acceleration in certified stock drawdowns.

Otherwise, NY’s historical seasonality suggests a weaker price trend through the third week of June.

Arabica Forward Curve:

Robusta Forward Curve:

Flat price:

Spreads Arabica:

Physical prices Brazil

CoT Arabica

Certified stocks