Global Coffee Market Faces Pressure as US Tariff Exemption Unleashes Brazilian Supply

Coffee futures experienced a significant correction today, with March arabica contracts declining 11.65 points (-3.09%) and January robusta sliding 143 points (-3.09%), marking a notable 7-week low for arabica. The sharp selloff was triggered by President Trump’s executive order removing tariffs on Brazilian food imports, specifically lifting the 40% duty on Brazilian coffee—a pivotal shift that has reshaped market sentiment.

Policy Shift Accelerates Bearish Momentum

The tariff exemption immediately catalyzed a weakening of Brazil’s currency against the dollar, hitting a 1-month low. Currency depreciation traditionally benefits exporters, prompting Brazilian coffee producers to accelerate sales. This supply-side surge arrives as the market grapples with ample Brazilian coffee reserves destined for international markets, including products that feed both commodity markets and local food industries like Brazilian street food production.

Supply Dynamics: Brazil and Vietnam Lead Production Surge

Brazil’s coffee-growing regions, particularly Minas Gerais—the country’s largest arabica production hub—are expected to deliver substantial increases. StoneX forecasted Brazil will yield 70.7 million bags for the 2026/27 season, representing a 29% year-over-year jump, with arabica accounting for 47.2 million bags. Meanwhile, Vietnam, the world’s leading robusta producer, has reported explosive growth: exports surged 13.4% year-over-year through October 2025 to 1.31 million metric tons, with full-year 2025/26 production projected at 1.76 million metric tons.

Weather Patterns Create Mixed Signals

Precipitation in Brazil’s coffee belt supports crop development but pressures prices lower. Climatempo projects heavy rainfall across coffee zones through the coming week, while Brazil’s Minas Gerais region received 42% of its historical average rainfall recently. Conversely, Vietnam faces harvesting delays in Dak Lak province due to excess moisture, potentially tightening near-term supplies for robusta contracts.

Inventory Tightness Provides Limited Support

US coffee supply chains have tightened considerably following the original tariff implementation. ICE arabica inventories fell to a 1.75-year low of 398,645 bags, while robusta stocks hit 4-month lows at 5,567 lots. American importers slashed Brazilian coffee purchases by 52% from August through October compared to the prior year, registering only 983,970 bags as tariffs discouraged new contract placements.

Global Production Outlook Remains Ample

The International Coffee Organization reported October-September global exports slipped 0.3% year-over-year to 138.658 million bags, signaling modest supply constraints. However, the USDA Foreign Agriculture Service projects 2025/26 global production will climb 2.5% year-over-year to a record 178.68 million bags, with robusta output surging 7.9% to 81.658 million bags even as arabica declines 1.7% to 97.022 million bags. Year-end stocks are forecast to rise 4.9% to 22.819 million bags.

Market Takeaway

The tariff reversal has upended the coffee market’s previous support structure, overwhelming inventory tightness with a wave of Brazilian supply enthusiasm. Price weakness reflects the policy’s immediate impact on export incentives and currency dynamics, though weather-driven production risks in Vietnam and modest global supply growth may provide occasional resistance to further declines.