Why Coffee Keeps Falling Despite El Niño Warnings

Coffee prices fell sharply again on October 8, even though traders are still watching one of the strongest El Niño patterns in decades. The reason is simpler than the weather headlines suggest: the market is dealing with coffee that is available now.

Brazil is shipping more. Vietnam is bringing fresh supply to market. And the International Coffee Organization now sees the first global surplus in five years. That combination is making it harder for weather risk alone to keep prices elevated, at least until there is clearer evidence that next season's crop is in trouble.

The market is pricing today's coffee, not next year's threat

December arabica and November robusta futures both settled lower on October 8 for a second straight session. That pullback came only days after coffee had rallied for three sessions, with arabica reaching a 3.5-week high and robusta a 6-week high on October 6, helped by a stronger Brazilian real.

What changed is that the supply story regained control. The International Coffee Organization reported on October 8 that global coffee production for 2025/26 rose to a record 183.6 million bags, while consumption slipped to 180.6 million bags. That leaves a projected surplus, the first in five years.

For traders, that surplus matters more right now than a weather threat that has not yet translated into confirmed crop damage. It shifts the market from scarcity anxiety to a more practical question: how much coffee is actually moving into export channels and exchange warehouses today?

Brazil's bigger crop is the clearest reason prices are under pressure

Brazil remains the center of that answer. Conab raised its 2026 coffee production estimate to 67.6 million bags on September 24, with arabica output expected to jump sharply from a year earlier. As the harvest wraps up, those beans are not just theoretical supply on a forecast sheet; they are reaching the physical market.

That is already showing up in trade flows. Brazil's September coffee exports rose more than 20% from a year earlier to 236,000 metric tons, according to the Trade Ministry. When the world's largest producer is harvesting heavily and exporting more at the same time, futures markets tend to struggle to hold weather-driven rallies.

This is also why the current selloff looks more durable than a one-day reaction. A large crop estimate can be debated. A large crop that is already moving into export channels is harder for the market to ignore.

Vietnam is adding a second wave of supply, especially for robusta

Brazil is not the only source of pressure. The USDA Foreign Agricultural Service forecasts Vietnam's 2026/27 coffee production at a higher level, and the new harvest has started in some growing areas in early October.

That matters because Vietnam dominates the robusta market, which has been especially sensitive to supply disruptions in recent years. If Brazil is easing pressure in arabica and Vietnam is doing the same in robusta, the bearish effect becomes broader than a single-origin story.

Vietnam's pricing data points in the same direction. Average coffee export prices fell nearly 20% in the first nine months of 2026 even as export volume increased. That mix usually signals a market where buyers are no longer scrambling for limited supply and sellers have less pricing power.

For roasters and importers, that is a more meaningful development than a headline about futures alone. It suggests wholesale cost pressure could ease if the supply trend holds, even if retail coffee prices take longer to reflect it because of contracts, packaging costs and distribution lags.

Rising exchange stocks are reinforcing the oversupply story

Inventory data is adding another bearish signal. ICE arabica coffee stocks climbed to a two-month high of 260,654 bags on October 7 after previously falling to a multi-decade low. ICE robusta inventories also reached a 10-month high on September 24.

That rebound matters because inventories often show whether a supply story is becoming real enough to affect deliverable coffee, not just forecasts. Reports that traders are preparing to deliver significant volumes of Brazilian arabica to exchange warehouses strengthen the case that certified stocks could keep building.

In other words, the market is no longer reacting only to estimates from Brazil and Vietnam. It is also seeing more coffee in the places that futures traders watch most closely.

El Niño is still the risk that could flip the story later

None of this means the weather risk has disappeared. It means the weather risk is losing, for now, to visible supply.

The US Climate Prediction Center said on July 8 that the current El Niño pattern is likely to be one of the strongest in more than 75 years. That raises the possibility of floods, droughts and temperature swings across coffee-producing regions in Asia and South America. In Brazil, the main concern is whether El Niño disrupts rains during the September-October flowering period, which helps determine the potential of the 2026/27 crop.

Coffee trader Commercial has warned that delayed rains could hurt yields and quality if flowering conditions deteriorate. That remains the main bullish counterargument to today's weaker prices: the market may be comfortable with current supply, but it could tighten again quickly if next season's crop starts to look vulnerable.

There is also a reason traders have not fully repriced coffee higher on that risk yet. Somar Meteorologia reported on October 5 that Minas Gerais, Brazil's key arabica-growing region, received 104% of its historical average rainfall in the week ending October 4. That does not remove the broader El Niño threat, but it does reduce the urgency of the immediate flowering concern.

The result is a market split across timeframes. Near-term supply looks heavy. Medium-term weather risk is still real. Prices are falling because the first part of that equation is more concrete today.

Who benefits now, and what could change next

For consumers and coffee roasters, the current setup points to some relief in wholesale costs if large supplies from Brazil and Vietnam continue to flow. That does not guarantee cheaper coffee on store shelves right away, but it can ease one of the pressures that has kept the category expensive.

For producers, especially smaller growers, the picture is tougher. Falling export prices and rising inventories can squeeze margins even in a year of strong output. A bigger crop does not always mean better earnings if the market is oversupplied.

The next test is straightforward: whether Brazil's favorable recent rainfall continues and whether exchange inventories keep rising. If both happen, the bearish supply story likely stays in control. If flowering conditions worsen or El Niño starts to damage crop expectations more visibly, the market could shift back toward next year's shortage risk.

Separately, the EU Deforestation Regulation is due to apply to large and medium coffee operators from December 30, 2026, increasing the importance of traceability and deforestation-free supply chains.

For investors and traders seeking exposure to commodities, comparing broker platforms like eToro can help access coffee futures and related assets efficiently.

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Sources

• Coffee Prices Fall on Abundant Supplies from Brazil - Barchart.com
• Functional coffee: the next major growth category?
• Citing Quality, Nespresso Discontinues Compostable Capsules - Daily Coffee News
• Vietnam coffee export prices fall nearly 20 per cent - DTiNews