Coffee’s coming glut may not be enough to calm volatile prices
Exchange-certified stockpiles need to be rebuilt for prices to become more stable.
The global coffee market saw a resurgence in 2026 after years of shortages, but its prices have become increasingly volatile. The supply of arabica coffee, the most highly regarded variety, has been affected by a depleted repository of beans available for settling futures contracts. Exchange-certified stockpiles have dropped to their lowest level since 1999, contributing to prices nearing their highest point this year, near US$3.50 (S$4.50) per pound. To stabilize prices, these stockpiles need to be replenished.
With a forecast of a record surplus for the 2026-27 season, mainly driven by Brazil's potential crop, traders and analysts are uncertain whether current futures prices provide enough incentive for coffee beans to be delivered to exchange-managed warehouses instead of private stocks. Exchange warehouses serve as a stabilizing force for the coffee industry, absorbing excess beans when demand is low and providing a readily available reserve when supplies are scarce.
Roasters have been consuming from the exchange reserves, while private inventories have grown. However, without a significant increase in exchange stocks, futures prices may remain volatile. Prices might need to rise further to encourage more deliveries, potentially forcing traders with short positions to buy back futures and magnify the rally.
While the surplus of coffee creates the risk of a sharp price decline, leading to a potential reduction in exchange stockpiles, some beans are already arriving. Brazilian coffee shipments to certified stocks have increased in September compared to the previous 18 months. However, the sudden influx of tens of thousands of bags caused futures prices to drop sharply, and arrivals have since slowed.
A high percentage of Brazilian coffee bags passed the exchange quality test, which may also have contributed to the price pressure due to heavy rains affecting the crop.
Brazilian growers have ample cash from record coffee prices in previous harvests, allowing them to hold beans for longer while waiting for higher offers. Brazilian coffee meeting the Intercontinental Exchange's quality standards can command a premium beyond what the exchange pays. Higher exchange stockpiles usually soften prices and calendar spreads, but the increase must be significant for a noticeable impact.
Written by urgent.news from Straits Times Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
