Coffee Futures Caught in Crossfire: Tariff Uncertainty and Record Supply Projections Weigh on Prices

December arabica coffee contracts (KCZ25) declined 0.55 points (-0.14%), while January robusta futures (RMF26) fell 5 points (-0.11%) as the market grapples with competing bullish and bearish forces. The second consecutive day of selling pressure reflects heightened uncertainty surrounding potential US tariff policy shifts—a factor that could reshape the entire coffee supply chain for PE investors and commodity traders alike.

Policy Signals and Near-Term Price Headwinds

Treasury Secretary Bessent’s Wednesday comments about “substantial announcements over the next couple of days” on non-US-grown crops, including coffee, sparked profit-taking across the market. This political uncertainty has overshadowed fundamentals, pushing robusta prices to their lowest level in two weeks. For institutional players tracking coffee exposure through various vehicles, the tariff question remains the critical near-term variable.

Production Surge Challenges Price Recovery

StoneX’s inaugural 2026/27 crop forecast delivered a significant blow to price sentiment. The organization projects Brazil will harvest 70.7 million bags of coffee next season—a 29% year-over-year jump—with arabica output reaching 47.2 million bags. This production expansion arrives as weather conditions in Brazil’s critical growing regions stabilize. Minas Gerais, responsible for the bulk of Brazil’s arabica supply, received 72.1mm of rain during the week ended November 7—160% of historical average—alleviating drought concerns that had supported prices earlier in the year.

Vietnam’s Output Expansion Reshapes Robusta Dynamics

Vietnam’s coffee export momentum continues unabated, with January-October 2025 shipments climbing 13.4% year-over-year to 1.31 million metric tons. More critically, 2025/26 production is forecast to rise 6% annually to 1.76 million metric tons (29.4 million bags), marking a four-year high for the world’s largest robusta producer. The Vietnam Coffee and Cocoa Association indicated production could be 10% higher than the prior crop if weather cooperates—a scenario that would further pressure prices for robusta-exposed portfolios.

Inventory Dynamics Signal Market Tightness

Despite downward price pressure, one stabilizing factor emerges: ICE monitored inventories are shrinking sharply. Arabica stocks fell to a 1.75-year low of 404,930 lots on Wednesday, while robusta inventories dropped to a 3.75-month low of 5,760 lots today. The 50% tariff regime on Brazilian coffee imports has forced American buyers to void new purchasing contracts, creating a bottleneck in US supply channels. Approximately one-third of America’s unroasted coffee comes from Brazil, making this tariff-driven inventory drain a meaningful structural support for prices.

Global Supply Tightening Offers Limited Relief

The International Coffee Organization reported Monday that global coffee exports during the current marketing year (October-September) fell 0.3% year-over-year to 138.658 million bags—a rare contraction that underscores underlying supply constraints. Brazilian production estimates continue to shift: Conab cut its 2025 arabica crop forecast by 4.9% to 35.2 million bags in September, while total Brazilian production was revised down 0.9% to 55.2 million bags.

Climate Wildcard and Long-Term Supply Outlook

NOAA’s September 16 announcement elevated La Niña odds to 71% for October-December in the southern hemisphere, introducing a potentially significant bullish catalyst. If the weather pattern materializes, Brazil’s 2026/27 crop faces drought risk—a scenario that could reverse near-term bearish sentiment. The USDA’s Foreign Agricultural Service, in its June projection, forecast world coffee production rising 2.5% year-over-year in 2025/26 to a record 178.68 million bags, with arabica declining 1.7% to 97.022 million bags and robusta expanding 7.9% to 81.658 million bags. FAS also projected 2025/26 ending stocks climbing 4.9% to 22.819 million bags.

For PE investors evaluating exposure to soft commodities, coffee presents a study in conflicting signals—policy uncertainty and production expansions pressuring prices today, while inventory tightness and climate risks provide a medium-term hedge against further declines.