Why Coffee Futures Are Rallying Amid US Tariff Uncertainty

Coffee futures are experiencing a significant rally today, driven by a complex mix of trade policy uncertainty and tightening global supplies. December arabica coffee contracts surged +14.70 points (+3.65%), while January ICE robusta futures jumped +115 points (+2.57%), signaling strong bullish momentum across both major coffee varieties.

The Tariff Puzzle Supporting Coffee Futures

The primary driver behind today’s price surge is confusion surrounding US tariff policy on Brazilian coffee. While the Trump administration announced last Friday that it would reduce reciprocal tariffs on non-US commodities to 10%, this relief only partially applied to coffee. More critically, the 40% tariff imposed on Brazil on “national emergency” grounds remains in place, and Brazilian officials confirm that Brazilian coffee exports to the US are still subject to these substantially higher duties. The Trump administration has not yet clarified whether coffee importers will be exempt from the 40% tariff, creating uncertainty that has pushed buyers into immediate purchasing decisions.

Inventory Tightening Intensifies Price Pressure

The tariff regime has triggered a sharp inventory drawdown that is supporting coffee futures prices. ICE-monitored arabica coffee inventories fell to a 1.75-year low of 400,790 bags on Monday, while robusta inventories dropped to a 4-month low of 5,648 lots. This inventory compression reflects a stark reality: American importers are actively avoiding new Brazilian coffee contracts due to tariff concerns, effectively tightening US supplies since approximately one-third of America’s unroasted coffee originates from Brazil.

The impact is quantifiable. US purchases of Brazilian coffee from August through October—when Trump’s tariffs took effect—plummeted 52% year-over-year to just 983,970 bags, demonstrating how dramatically trade policy is reshaping import patterns and supporting coffee futures valuations.

Production Dynamics: Mixed Signals for Coffee Markets

Brazil’s production outlook presents a nuanced picture. Conab, Brazil’s official crop forecasting agency, reduced its 2025 arabica coffee crop estimate on September 4 by 4.9% to 35.2 million bags, down from a May forecast of 37.0 million bags. Total Brazil coffee production for 2025 was also trimmed by 0.9% to 55.2 million bags. These downward revisions have lent support to coffee futures.

However, this support may prove temporary. StoneX forecast last Wednesday that Brazil will produce 70.7 million bags in the 2026/27 marketing year (including 47.2 million bags of arabica), representing a +29% year-over-year increase. Additionally, the US Department of Agriculture’s Foreign Agriculture Service (FAS) projected in June that Brazil’s 2025/26 coffee production will rise +0.5% year-over-year to 65 million bags, suggesting the production decline is cyclical rather than structural.

Weather developments in Brazil’s primary growing regions also warrant attention. Minas Gerais, Brazil’s largest arabica coffee-growing area, received only 19.8 mm of rain during the week ended November 14, representing just 42% of the historical average—a potential constraint on crop development that could support coffee futures prices in the near term.

Vietnam’s Supply Surge Presents a Headwind

Vietnam, the world’s largest robusta coffee producer, is flooding global markets with supply. The Vietnam National Statistics Office reported that Vietnam’s January-October 2025 coffee exports rose 13.4% year-over-year to 1.31 million metric tons. More significantly, Vietnam’s 2025/26 coffee production is projected to climb 6% year-over-year to 1.76 million metric tons (29.4 million bags), marking a 4-year high.

The Vietnam Coffee and Cocoa Association (Vicofa) added to these projections on October 24, stating that Vietnam’s 2025/26 coffee output could be 10% higher than the previous crop year if weather conditions remain favorable. This aggressive Vietnamese supply growth is creating downward pressure on coffee futures prices, particularly for robusta contracts.

The Global Supply Picture

Despite Vietnamese supply strength, global coffee exports remain relatively constrained. The International Coffee Organization (ICO) reported last Monday that global coffee exports for the current marketing year (October-September) fell 0.3% year-over-year to 138.658 million bags, indicating that supply-demand balance remains tight despite Vietnam’s expansion.

The USDA’s FAS projected on June 25 that world coffee production in 2025/26 will increase 2.5% year-over-year to a record 178.68 million bags. However, this growth masks diverging trends: arabica production is projected to decline 1.7% to 97.022 million bags, while robusta output will surge 7.9% to 81.658 million bags. FAS forecasts that 2025/26 ending stocks will climb 4.9% to 22.819 million bags from 21.752 million bags in 2024/25, suggesting that despite near-term tightness, the global supply picture will gradually normalize.

What Coffee Futures Traders Should Watch

The divergence between near-term inventory constraints and longer-term production expansions creates a complex environment for coffee futures investors. While tariff uncertainty and low inventories are supporting prices today, the market must reconcile aggressive Brazilian production growth forecasts, Vietnam’s expanding robusta supplies, and expected inventory rebuilding in 2025/26. The current rally in coffee futures likely reflects traders positioning ahead of clarification on US tariff policy, but underlying fundamentals suggest downside risks if trade policy uncertainty dissipates and production forecasts materialize as expected.