Dec 1 / Laleska Moda

Tariffs are out, but low stocks could limit corrections in the short term

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  • The 40% additional tariffs on Brazilian coffee beans (except for soluble coffee) were lifted on November 20, bringing relief to the market. However, low stocks in destinations could cap part of the correction expected in prices.

  • Arabica ICE certified stocks continue around the 400 K bags levels. Although it is expected to make some recovery due to the expiry of the December contract, inventories need to rise more significantly until they reach a comfortable level. Notably, Robusta certified stocks fell significantly in the past days.

  • EU and Japan stocks, two important markets for coffee, also continue at one of its lowest levels in years. The European Federation Stocks registered a drop in September and October, to 7.8 M bags, the lowest since May.

  • On the origins side, while sales in Brazil are still limited, rainfall in Vietnam continues to delay the harvest of the second largest coffee supplier in the world.

  • Current spread levels and funds position also point to short-term support for prices, as ongoing supply concerns continue.

Tariffs are out, but low stocks could limit corrections in the short term

On November 20, U.S. President Donald Trump announced that the 40% additional tariffs on Brazilian beans, except for soluble coffee, would be lifted, bringing significant relief to the coffee market. Following the announcement, futures declined, with Arabica contracts reaching a two month low on Friday, November 21. However, prices recovered part of the losses in the following days, as destination stocks remain low and Brazilian farmers continue to show little interest in new sales despite the tariff relief.

Arabica inventories increased slightly early last week, and pending grading volumes also rose, suggesting that some recovery could occur in the coming weeks with the expiration of the December contract. Nevertheless, certified stocks remain at their lowest levels in years, closing last Friday at 406.9 K bags, a year to date drop of 54.96%. While renewed trading between the U.S. and Brazil could reduce reliance on certified stocks, a higher certification volume is still required for inventories to return to comfortable levels.

LN-Robusta (USD/mt), NY-Arabica and Arbitrage (c/lb) (2nd contract)

Source: LSEG

Arabica Certified Stocks (‘000 bags)

Source: ICE

Robusta Certified Stocks (‘000 bags)

Source: ICE

Robusta certified stocks also fell sharply last week, closing at 755 K bags on Friday, November 28. Although still higher than 2024 levels, this downward trend warrants close monitoring, particularly as Vietnam’s 25/26 harvest - one of the main sources of Robusta certified stocks - is being delayed by adverse weather conditions. The ongoing La Niña has brought heavy rainfall, storms, and typhoons, leading to saturated soils, logistical difficulties, and restricted farmer access to coffee areas, all of which have slowed harvesting. This week, Storm Koto is expected to hit parts of the country, though its impact on the Central Highlands coffee regions should be minimal, potentially allowing harvest activities to resume.

Vietnam: Cumulative Precipitation in Central Highlands (mm)

Source: Gadas, CPC

Japan: Japan Coffee Association Stocks (M bags)

Source: JCA

Beyond certified stocks, destination inventories also remain low. In Japan, the Japan Coffee Federation reported stocks below last year’s levels and at minimal levels for the period. In Europe, the European Coffee Federation reported that EU stocks fell to 7.8 million bags in October, the lowest since May and a decline of 9.1% compared with the previous year.

On the consumption side, apparent demand in the EU showed signs of recovery. Based on stock flows, imports, and re exports, apparent consumption in 24/25 rose compared with 23/24. Although still below 22/23 levels, the season ended above the 10 year average. October, the first month of the 25/26 season, also showed strong consumption, which is expected to remain firm in the coming months as winter in the Northern Hemisphere typically boosts coffee demand.


EU: European Coffee Federation Stocks (M bags)

Source: ECF

EU: Apparent Consumption (M bags)

Source: ECF, European Coission, Hedgepoint

In this context, the March/26 contract could find suport around the 350 c/lb in the short-term, supported by low stocks and Brazilian farmers holding significant volumes from the 25/26 crop. Current spread levels for March/26 and May/26 Arabica contracts are still positive, also indicating some support in the short term. However, 2026 may still bring a price correction, particularly as Brazil’s 26/27 crop is developing well and the 25/26 harvests from Vietnam and Central America begin to reach the market.

In Summary

On November 20, U.S. President Donald Trump announced the removal of the 40% additional tariffs on Brazilian beans (except soluble coffee), which initially pushed Arabica futures to a two month low before prices partially recovered. Despite the tariff relief, Brazilian farmers remain reluctant to sell, and destination stocks continue at low levels, keeping support for coffee prices.

Arabica certified stocks remain historically low, while Robusta certified stocks also fell in the past days, with Vietnam’s harvest delayed by heavy rains and storms linked to La Niña. Although Storm Koto is expected to have minimal impact on the Central Highlands, adverse weather has already caused logistical challenges and slowed harvesting.

Beyond certified stocks, inventories in Japan and the EU are also declining. However, apparent consumption in the EU has recovered, ending the 24/25 season above the 10 year average and starting the 25/26 season strongly. In this sense, low stocks and winter demand could support prices in the short term, but 2026 may bring a correction as Brazil’s 26/27 crop develops well and new supply from Vietnam and Central America enters the market.

Weekly Report — Coffee

Written by Laleska Moda

laleska.moda@hedgepointglobal.com

Reviewed by Carolina França
carolina.franca@hedgepointglobal.com
www.hedgepointglobal.com

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