Source: Refinitiv, ICE, GSX
Macro Developments and Tariffs Drive Market Volatility
On April 2, 2025, President Trump’s sweeping tariff announcements triggered a broad sell-off across equities and the US dollar. However, the initial impact was tempered as elements of the plan were later moderated. Many countries were granted a 90-day reprieve, leaving them subject to a reduced tariff rate of 10% from April 10 through July 9.
This policy shift fueled significant volatility across global markets, and NY Coffee was no exception. Prices declined by 63 cents before staging a sharp 95-cent rally, reflecting the broader macro environment and momentum-driven trading.
Liberation Day induced volatility
Price Volatility: Key Drivers
Lack of Natural Sellers: Credit lines remain tight, while Central American exports have concluded. Peru has yet to enter the market, and Brazil has already marketed a substantial portion of its 2025/26 arabica crop.
Thin Liquidity: Historically low OI created an environment where modest flows triggered exaggerated price movements.
Speculative Activity: Following the initial sell-off, momentum-driven buying contributed to the rapid rebound
Global Stock Levels Remain Critically Low
Japan (March 2025): Port stocks fell to an estimated 2.2 million bags — multi-year lows.
Europe (February 2025): Stocks declined by 1.7 million bags over two months, reaching an estimated 7.4 million bags.
United States: The Green Coffee Association ceased publishing data in 2023, but market consensus suggests stocks are now below 4 million bags, with some estimates as low as 3 million.
By the end of April, ICE-certified arabica stocks were priced below FOB replacement costs, highlighting continued supply tightness.
Supply and Demand Outlook: Still Tight
Global supply and demand estimates remain largely unchanged. Brazil’s 2025/26 arabica production is expected to range between 38–41 million bags, though outliers exist. Most analysts anticipate 2025/26 to mark the fifth consecutive global deficit year. Brazil’s internal market is expected to increase robusta usage in blends, potentially shifting up to 3 to 5 million bags of arabicas into export channels.
Looking Ahead: Risks and Opportunities
Tariffs and Trade Policy: While some hope remains for a carve-out on coffee tariffs, market participants largely expect 10% tariffs to persist for major exporters. Elevated market prices mean these costs are likely to be passed along the supply chain. Tariff disparities — 10% for Brazil and Colombia, 46% for Vietnam, and 32% for Indonesia — will necessitate careful blend management and sourcing adjustments by roasters.
Global Growth and Currency Dynamics: Although trade tensions may weigh on global growth, many analysts anticipate a gradual decline in the US dollar over the longer term, which could provide some relief to commodities.
Brazilian Sales and Crop Risks: Forward sales for Brazil’s 2025/26 arabica crop remain modest, with estimates ranging from 15% to 35% sold. The crop is viewed as historically undersold, adding uncertainty to future supply availability.
Seasonal and Weather Risks: Price volatility is likely to persist, particularly as the market approaches key seasonal risk windows:
Mid-May to Late June: Seasonal weakness often emerges after May peaks.
June 20 – July 20: Frost or cold weather threats could spark significant volatility.
September – Early October: Delayed rains or erratic weather patterns may impact flowering and crop development.
Conclusion: A Delicately Balanced Market
While many believe the market may be capped around the $4 level without a new catalyst, weather remains the key variable that could trigger a breakout. Should Brazil navigate the critical winter period without damaging cold, and assuming a normal spring flowering, the market could enter 2026/27 with the potential for a global surplus.
In such a scenario, December 2026 to May 2027 futures may face pressure, with prices potentially struggling to remain above $3. Until then, thin liquidity and constrained supply will likely continue to drive sharp and sometimes unpredictable price movements.
