Coffee futures have surged sharply in recent weeks, with Arabica prices leading the rally. A combination of weather concerns in Brazil and new geopolitical risks has triggered market volatility. Here’s a breakdown of what’s happening in the coffee market, why prices are rising, and what could happen next.
Dry Conditions in Brazil
Brazil, the world’s top Arabica coffee producer, is facing unusually dry weather. As per the latest Comunicaffe Report – The Brazilian coffee belt reported that Minas Gerais has seen no rain for the past week. With over two-thirds of the current harvest already completed, the lack of rain raises concerns about the quality and volume of the upcoming 2025 and 2026 harvests. This has sparked supply fears in the global market.
Geopolitical Volatility & Tariff Threats
As we mentioned in our previous article, the U.S. has announced a proposed 50% tariff on Brazilian imports, including coffee, starting August 1. This move has increased uncertainty in the market, causing traders to rush to secure coffee supplies ahead of the tariff.
Market Snapshot
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Arabica futures rose 3–4% following the tariff news and have since climbed further on worsening weather.
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Robusta futures, though previously down, are stabilizing as traders reconsider supply risks.
Will the Rally Last?
Bullish Factors
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Continued dry weather could tighten supply even further.
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If the U.S. proceeds with the tariff as planned, Brazilian beans will become more expensive in the U.S., shifting demand to other origins or raising wholesale prices
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Spillover impacts on related commodities (e.g. orange juice) have shown similar trajectories, indicating broader stress in Brazilian exports .
Bearish Counterpoints
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The tariff could be delayed, reduced, or face exemptions specific to coffee.
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If rainfall resumes, Brazil’s crop could recover, easing supply constraints.
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Higher prices might push U.S. buyers towards alternate origins like India, Colombia, Central America, or Vietnam.
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Speculative interest may cool off if fears dissipate – a common pattern in commodity markets .
Our Take
In the context of impact on local markets, talking to a few Traders and Curing Agencies, there is no impact on procurement/selling prices of coffee. If at all, there has been a very marginal movement in Arabica parchment. The impact of the Futures Market on Coffee Prices in New York is largely for Arabica and it takes time to reflect on the procurement prices for shipments from Kerala – where a select few have a stranglehold on margins that they make. London Coffee Robusta Futures has not shown much movement, with prices staying about the same as previous year.
Reliable publishing of price movements remains the need of the hour and it should be the responsibility of The Coffee Board and Planters Associations (KPA and CPA) to take the lead on this front.
Coffee market is controlled by online traders who study the demand and supply and invest in the market. Here the Planter or the consumer has no control over the market. Based on their need they keep buying and takes positions with High risk. Planter’s is only option to increase the volume of production by all available method of agricultural practices and sell at different levels of market to average it out. If we the platers go chasing the market it will end nowhere and we don’t know when the market will fall since online traders will pull and push based on their risk. Now the biggest worry is not the market but EUDR imposed by EU.
EUDR may not have a huge impact on COORG COFFEE because traditionally COFFEE IN KODAGU is shade grown and we don’t remove wild trees deliberately because these trees provide the much required shade for coffee which gives it a unique flavour and taste which is much sought after the world over. Primarily Deforestation in it’s true sense hardly happens in kodagu.
Commodity pricing especially agricultural commodity pricing of Coffee looks like ROCKET SCIENCE to me. This is something which has baffled me to no end. Now with Trump Tariff scenario the suspense, confusion, Conundrum and gamble has just multiplied. Well it just strengthens my logic that AGRICULTURE IS THE WORST GAMBLE one can indulge in.