Aug 5 / Laleska Moda

Coffee Market Call Highlights

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This analysis summarizes the main points discussed in the Coffee Market Call on July 31. Additionally, some figures were updated with the latest data and may differ from those presented last week.

US new tariffs could bring inflationary pressure

Coffee prices rose at the start of this week, supported by weather risks in Brazil and ongoing global trade uncertainties due to US tariffs imposed on Brazilian goods in mid-July. Consequently, the Arabica’s September contract traded above the 300 c/lb his Monday, closing at 301.7 c/lb, up 1.5% in seven days.

A new cold front arrived in Brazil this week, bringing temperatures down in major coffee-producing regions. The South of Minas is expected to have a sharper drop, with the Somar forecasting minimal temperatures between 6ºC and 8ºC on the 30th and 31st of July. is expected to experience a sharper drop, with Somar forecasting minimum temperatures between 6°C and 8°C on July 30th and 31st. However, some models from the Brazilian Center for Weather Forecasting and Climate Studies (CPTEC) indicate temperatures dropping below 5°C in the next three days, with a higher risk of frost in South of Minas.

US Consumer Price Index (YoY %)

Source: US Buerau of Labor Statistics, Bloomberg

Although in line with expectations, the CPI increased by 0.3% in June, bringing the 12-month inflation rate to 2.7%, above the Fed's 2% target. Some analysts point out that part of the movement was due to the effect of tariffs, and they expect further growth in the coming months. Last Friday (01) update on US nonfarm payroll data also worried the market, as not only were July figures below market expectation, but June and May figures were also revised down.

A weakening US economy could put pressure on Trump’s trade policy and influence future Fed decisions. If the tariffs on coffee indeed come into effect, they could hamper demand.


US Payrolls (‘000 positions)

Source: US Buerau of Labor Statistics,; LSEG

US coffee imports were on recovery, but tariffs could change the scenario

US net coffee imports are rising in 24/25, above the last two seasons’ performance. Despite rising prices for consumers, imports are now more in line with historic 10-year average levels, showing that this market may be more resilient than previously expected, as about 76% of Americans drink coffee, according to the NCA. However, the new trade scenario brings uncertainties.

US: Coffee Net Imports (M bags)

Source: US. International Trade Commission, Hedgepoint

As mentioned before, Brazilian beans account for around 30% of all US coffee imports, so a 50% tariff would further increase prices, which are already at record levels, and could potentially harm demand. Although US importers could source coffee from other countries, Brazil currently has the highest availability (especially of Arabica), and as the largest producer, the US will likely need to rely on Brazil's production to meet its current demand.

US: Coffee Imports by Region/Country (% of total)

Source: US. International Trade Commission, Hedgepoint

Brazil’s 25/26 harvest is in its final stage

While the Conilon/Robusta 25/26 harvest is almost completed, Arabica’s field work is also in its final stage, confirming a drop in this variety’s production. Additionally, there have been reports of quality issues in recent weeks, particularly concerning peaberry (moca) coffee and cup quality. On the other hand, total Brazilian production is expected to remain at similar levels of those of the 24/25 season, given the higher Conilon volume.

The increased supply of Conilon also continues to widen the price gap between this variety and Arabica, which will likely lead to changes in domestic blends with higher Conilon content.

Despite the end of the harvest, sales in the physical market continue to be sluggish, with higher coffee availability. Many farmers have chosen to stay out of the market in recent months due to a price drop driven by harvest-related supply pressure. This has led to lower-than-average sales by farmers. With new concerns emerging around US’ trade policy, these conditions may persist.

In the past few weeks, supply has put downward pressure on Brazilian differentials, which had remained above those of other origins for most of the first half of 2025. However, since these origins are also in their off-season, the world will depend more on Brazilian beans. This could provide short-term support to prices as farmers have little interest in new sales

Arabica Differentials (c/lb)

Source: LSEG, Safras & Mercado


Weather should be monitored closely in other origins

Most of the other coffee-producing countries are now on their development period for the 25/26 season. In Asia, Vietnam is expected to have a recovery in production, given higher investments and positive weather conditions, despite a drier July. Production in Central American countries are also expected to be similar or slightly higher than in 24/25, due to better weather prospects, with an ENSO-neutral scenario. However, we could further decrease Colombia production, given excessive rainfall during the flowering period.

Global Balance and Price Behavior

For now, we are considering a slight drop of 1.1% in demand in 24/25 (the current cycle in destinations) in our base scenario, considering current EU imports trend, but with a deficit in 24/25. For 25/26, if we consider a more stable demand, the best case would be for a balance near zero. New US tariffs, however, could change the scenario.

In an exercise were there is still the possibility of further impact on demand in the US in case the tariffs come into effect, we considered a further drop in 24/25, leading to a smaller deficit. In general, we also have to keep in mind that, not only is the current trade and macroeconomic scenario unstable, but most of other producing countries are also still in their development period, which could bring changes in global supply and demand scenario.

In this sense, prices will likely continue highly volatile, especially in the short-term, with all the uncertainties between Brazil and US coffee trade. In the medium term, and with the expectation of a reduction in tariff uncertainties, the weather in the Brazilian spring will be key to the 26/27 crop development and to price trends.

Global Supply and Demand for Coffee (M bags)

Source: Hedgepoint

In Summary

Click here to check the complete Market Call.

Weekly Report — Coffee

Written by Laleska Moda

laleska.moda@hedgepointglobal.com

Reviewed by Livea Coda
livea.coda@hedgepointglobal.com
www.hedgepointglobal.com

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