Coffee prices are experiencing a downturn as rain forecasts for Brazil emerge, impacting the coffee crop and market dynamics. This development comes as a surprise, given the recent surge in coffee prices due to US tariffs on Brazilian coffee. However, the market is now adjusting as the potential for rain in Brazil could significantly impact the coffee crop, which is crucial for global coffee supply.
The severe rain forecast by Climatempo for Brazil's coffee-growing regions is a key factor. This weather pattern is expected to support coffee crop development, which is generally positive for farmers but negative for coffee prices. The Trump administration's decision to drop tariffs on non-US-grown commodities, including coffee, was a temporary relief, but it only applied to 10% reciprocal tariffs. Brazil's vice president highlighted that the country's coffee exports to the US are still subject to a separate 40% tariff imposed by the Trump administration on 'national emergency' grounds. The administration has yet to clarify whether US coffee importers are exempt from this higher tariff.
Shrinking ICE coffee inventories have also been supportive of prices, but the potential for rain in Brazil could reverse this trend. The US tariffs on Brazilian coffee imports have led to a sharp drawdown in ICE coffee inventories, with arabica inventories falling to a 1.75-year low and robusta inventories reaching a 4-month low. American buyers are avoiding new contracts for Brazilian coffee purchases due to the tariffs, which is tightening US supplies. About a third of America's unroasted coffee comes from Brazil, and purchases from August to October dropped by 52% from the previous year.
Additionally, coffee prices received support from Monday's news that Brazil's largest arabica coffee-growing area, Minas Gerais, received 19.8 mm of rain during the week ended November 14, or 42% of the historical average. However, a bearish factor is the StoneX forecast that Brazil will produce 70.7 million bags of coffee in the new 2026/27 marketing year, including 47.2 million bags of arabica, a 29% year-over-year increase.
Increased Vietnamese coffee supplies are also bearish for prices. Vietnam's coffee exports rose by 13.4% year-over-year from January to October 2025, and its 2025/26 coffee production is projected to climb by 6% year-over-year to 1.76 million metric tons or 29.4 million bags, a 4-year high. The Vietnam Coffee and Cocoa Association (Vicofa) predicts a 10% increase in output if weather conditions remain favorable.
Despite these bearish factors, signs of tighter global coffee supplies are supportive of prices. The International Coffee Organization (ICO) reported a 0.3% year-over-year fall in global coffee exports for the current marketing year (October-September) to 138.658 million bags. Conab, Brazil's crop forecasting agency, also cut its Brazil 2025 arabica coffee crop estimate by 4.9% to 35.2 million bags, and the USDA's Foreign Agriculture Service (FAS) projected a 2.5% year-over-year increase in world coffee production in 2025/26.
The market's response to these factors remains to be seen, and investors and traders will closely monitor the impact of rain on Brazil's coffee crop and the subsequent effects on global coffee prices and supply.
