Nov 24 / Laleska Moda

Coffee Live with Experts Highlights

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This analysis summarizes the main points discussed during the Coffee Live with Experts on November 19. It is important to note that the session took place before the announcement of tariff relief by Trump, so some figures and text have since been updated with the latest data and may differ from those presented last week.

Macroeconomic Outlook

On the macro front, the U.S. economic scenario has been the main driver of market movements. Persistent inflation and a weaker job market led the Federal Reserve (Fed) to cut rates twice in September and October, bringing its lending rate to 3.75–4%. The government shutdown from October to November 12 limited Fed action due to scarce economic data, though another cut remains possible this year. Markets are closely watching upcoming inflation and employment figures, as Fed decisions will impact not only the dollar but also capital flow and, potentially, could affect coffee demand.

PCE and Fed Funds Target Rate (%)

Source: LSEG

Dollar fluctuations are particularly relevant since coffee is traded in dollars. In Brazil, the currency has been influenced both by U.S. uncertainties and interest rate differentials. While Brazil’s Central Bank kept the Selic rate at 15% annually, Fed cuts could strengthen the real and affect Brazilian coffee trade.

However, the most significant market impact so far has come from U.S. tariffs. In mid-November, Trump lifted reciprocal tariffs on most origins, and on November 20 removed the 40% levy on Brazilian beans, easing market pressure. Still, volatility may persist as Arabica certified stocks have been heavily drawn down since August due to tariff effects.

BRL and Dolar Index Performance

Source: LSEG

Low stocks continue to support prices

While Brazilian farmers are selling and certifying less coffee than previous years amid the off-season for most other origins, uncertainty surrounding tariffs has led to Arabica certified stocks being consumed. Since the beginning of the year, Brazilian farmers have sent less coffee for certification due to record prices, higher differential and lower overall stocks. Despite an increase in supply from the 25/26 harvest, the amount of coffee certified did not increase significantly, as traders and roasters rushed to secure coffee amid rising prices and uncertainty.

So, until mid-November, the three main factors influencing prices were tariffs, certified stocks and the 26/27 Brazilian cycle. As tariffs are now lifted, this removes part of the current bullish pressure and could allow ICE stocks to recover, leaving Brazilian crop development as the main risk factor (and price indicator) in the market.

Arabica Certified Stocks (‘000 bags)

Source: ICE

However, certified stocks must rise significantly to reach more comfortable levels, which could limit sharp price corrections in the coming months. In this sense, near-term Arabica contracts remain at historically high levels, reflecting persistent short-term concerns and raising hedging costs for market participants. In contrast, Robusta spreads are narrower than in 2024, suggesting less supply risk, supported by Brazil’s large Conilon crop and expectations of a recovery in Vietnam.

Arabica: December and March Contracts Spread (c/lb)

Source: LSEG

Weather in Brazil is more favorable 

In Brazil, the dry weather in September and early October indeed brought risks for the 26/27 crop development. However, based on current weather patterns and past years investments, such as new production areas, Arabica output is initially expected to rise in the 26/27 season.

For Conilon, the development is also going well but production may be a little lower than the 25/26 level. Typically, a strong crop cycle is followed by a decline, as the reproductive effort tends to reduce plant vigor. On the other hand, an expansion in cultivated areas is expected to partially offset this reduction.

Regarding commercialization, Brazilian farmers are selling less coffee than last season, largely due to market uncertainties and the unfolding 26/27 crop, which has supported prices in recent months. This slowdown is also evident in lower exports during the 25/26 cycle, with US-Brazil trade muted since late July. However, with tariffs lifted and the 26/27 season developing well, Brazilian shipments could rise.

Brazil: Monthly Cumulative Precipitation in Minas Gerais Coffee Regions (mm)

Source: Somar, Bloomberg


Other origins harvest the 25/26 season 

As most of other origins enters its harvest period, weather continues to be monitored, especially as an active La Niña could lead to above than average precipitation in Central America and Vietnam. Especially in Vietnam, the country has experienced heavy rainfall over the past two months, and more recently Typhoon Kalmaegi disrupted the harvest of the 25/26 season and logistics. Higher precipitation levels are already delaying the harvest pace and the arrival of larger volumes in the market. The rain is also affecting the bean drying process, decreasing coffee quality.

However, the total output for the crop is unlikely to change and, while the harvest delay could reflect in lower exports in the first months of the season, the expectation is for higher shipments in the cycle cumulative. Exports from Indonesia have also increased significantly in 25/26, especially as Brazilian farmers are holding back on sales and stocks in Vietnam remain low.

Vietnam: Cumulative Precipitation in Central Highlands (mm)

Source: Gadas, CPC


In the Arabica side, higher precipitation in Central America in the past months are expected to lead to recovery in washed Arabica in the region, albeit continued rains are also delaying the harvest. However, in Colombia, heavy rainfall in the first half of the year lead to a decrease in production in 25/26, With this, the total output of washed Arabica in Latin America is expected to change little from the 24/25 cycle.

In East Africa, both Uganda and Ethiopia have taken advantage of higher prices and the absence of other origins, such as Brazil and Vietnam, in recent months to increase their exports. Given current export patterns, we have also increased our production estimates for both countries. With positive weather this year, an increase in supply from these regions is possible.

Global balance

After 4 years of deficit, we could see a small surplus in 25/26, reflecting higher Robusta output in main producers like Brazil and Vietnam and an increase in East Africa supply (Arabica and Robusta). Demand wise, after a sluggish performance on 24/25 in some destinations, we anticipate a small rise in 25/26, due to higher availability, although price impact should be monitored closely.

The current tariff relief and a potential surplus in 26/27, due to the Brazilian recovery could also pressure down prices in 2026, allowing for a demand recovery. However, even with a surplus on 25/26, stocks continue at lower levels and are likely to influence prices in the short to medium term.

Variety wise, Robusta stocks could see some recovery in 25/26, especially in origins such as Brazil and Vietnam, due to higher production. On the other hand, the higher demand for variety due to lower prices than those of Arabica could limit the movement. For Arabica, a smaller crop in Brazil can lead to further decrease in the variety inventories. Current financial costs and prices also discourage stock formation. In general, the stock-to-use ratio is lower, which means prices will remain more sensitive to changes in supply and demand. For 26/27, stocks may recover if Brazil produces a larger crop, potentially leading to a bearish price trend.

Global Supply and Demand for Coffee (M bags)

Source: Hedgepoint

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Written by Laleska Moda

laleska.moda@hedgepointglobal.com

Reviewed by Thais Italiani
thais.italiani@hedgepointglobal.com
www.hedgepointglobal.com

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