Live with Experts – Coffee Market Highlights

After a sharp drop early this year, spreads for near-term contracts increased, especially the July-September one, reflecting the worries over short-term supply, as farmers continue to hold new coffee sales, especially in Brazil.

This has also been reflected in differentials as the 25/26 harvest is now completed in other key origins and, with no additional harvest-related cash needs, farmers and exporters are reassessing the risks posed by rising production and logistics costs, with sales tepid.

Meanwhile, as the world focuses on Brazil, farmers still hold their sales, triggering differentials early this year. Normally, at this time of the year, Brazilian farmers would be selling more coffee, raising doubts about farmers’ willingness to sell.

Higher financial costs and Brazilian farmers being less active in the past months have also reflected in imports and stocks figures, especially in the EU. The European Union net imports have decreased considerably in 24/25 and 25/26, due to an increase in re-export, higher coffee prices, and carry costs, besides a decrease in selling appetite by farmers. This has also contributed to a decrease in ECF stocks, and, with the current inverted market, this trend is likely to continue

In other destinations, however, the scenario is a little more hopeful. Although U.S imports were affected by tariffs in 2025, January figures point to a recovery in 2026, especially with an expected record crop in Brazil. Asian countries, on the other hand, are showing higher import figures in 25/26. However, the current market structure could still limit stockpiling in these countries.

In the past months, a good volume of precipitation was recorded in all coffee-producing regions, contributing to the beans’ filling, which will likely reflect in an increase in processing yields. Favorable weather and an increase in investments (and area) in the past years will lead to higher production in the country in 26/27, driven by a recovery in Arabica production and still good figures in Conilon.

The chances of a La Niño in May-June have risen, likely extending until early 2027. The major impacts for coffee regions are:

• Central America: It can reduce hurricane activity and rain, even leading to drought in some regions. Also, temperatures could increase significantly.

• Southeast Asia: It can increase hurricane activity in the Pacific and bring storms to Vietnam and part of Indonesia but can also bring drought to the southeast of the country.

• East Africa: It can bring floods in the south of Ethiopia. In the northern part of the country and in Uganda, it can cause drought. Temperatures also tend to increase.

Current models also point to a significant increase in the Pacific temperatures at the end of 2026, which could translate into a strong event in this period. This is especially significant as, aside from Indonesia, all other producers are in their main development period for the 26/27, with weather playing a key role in production figures and global surplus. A strong El Niño could affect trade flows.  

After a few seasons in a tight scenario, coffee balance could finally see a significant surplus in 26/27, mainly due to the record crop in Brazil. However, it is important to note that, with other origins in the development period, the size of this surplus could change. We are also taking a more conservative approach regarding demand. 

With this, the landscape for prices is bearish, but not without volatility. The record crop in Brazil is expected to put downward pressure on prices. However, some key points in the market could lead to periods of upside:

• Low farmer selling and high differentials.

• An inverted market and high financial costs make prices more sensitive to changes in supply.

• Low stocks in destinations may trigger a price hike as buyers enter the market.

• El Niño could affect production.

laleska.moda@hedgepointglobal.com