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Market Recap
A cool breeze sparked a snapback rally mid-month, pulling prices halfway back to 372¢ before the downtrend resumed, with the market closing June around $2.93. Between April 29 and June 24, CITs, non-commercials, and index funds net sold 16,200 lots (~4.6 million bags on paper), split roughly 75% long liquidation and 25% new shorts. Open interest fell 8,100 lots over the same period.
This spec long liquidation occurred during a seasonally negative window (mid-May through the third week of June), with no cold weather threats, no fresh bullish catalysts, and normal harvest progress in Brazil—the path of least resistance was lower.
Brazil Update
Major trade houses see the global 2025/26 supply-demand balance roughly in equilibrium:
NKG projects a modest surplus of +2.4 million bags (173.3M prod. / 170.9M cons.)
ECOM forecasts a mild deficit of -1.1 million bags (175.7M / 176.8M)
For Brazil specifically, most estimates place arabica production at 38.5–40.5M bags, while conilon ranges are wider at 24.5–27.5M bags.
Harvest progress as of late June:
Cooxupé members (6/27): 31.4% harvested vs. 34.2% last year
Volcafe: 45% arabica, 75% conilon harvested
Consensus suggests 30–35% of the 2025/26 crop is already sold.
Stocks at Destination
ICE NY certified stocks fell 47,200 bags in June but remain >800,000 bags
Brazil cert stocks dropped 153,000 bags (continuing the 2025 decline)
Offsets came from cert builds in Mexico (+60k), India (+23k), Nicaragua (+18k)
U.S. stocks are likely rebuilding amid tariff concerns, estimated at 3–4M bags without official GCA data. Japanese stocks (end-May) slightly higher at 2.247M, though down 10.5% YoY. European stocks (end-April) steady at 7.073M, flat YoY. Arabica stock/consumption ratios are hovering near 20%, keeping destination stocks historically tight.
Macro & Tariffs
The USD index (DXY) dropped 2.79% in June, while the Brazilian real firmed ~4%. Brazil’s SELIC rate sits at 15%—the highest since 2006. However, in July we have seen the BRL weaken on the back of 50% Tariff threats from President Trump.
The U.S. 90-day suspension on new tariffs ended on July 9, 2025. Notable moves:
U.K. & Vietnam have agreed on tariff protocols; Vietnam facing a 20% coffee tariff
J.M. Smucker (Folgers) is planning its fourth price increase YoY, citing green coffee tariffs as its biggest exposure
NCA remains optimistic coffee imports may secure exemptions, with U.S. Ag Secretary Rollins signaling possible carve-outs for ag goods not grown domestically
Looking Ahead
The wide arabica/robusta arbitrage continues driving demand toward robusta. Brazilian domestic consumption may shift to 75–90% robusta, potentially adding 6–9M bags of conilon demand.
Seasonality is turning more constructive, typically positive through early August, before focus shifts to the critical Sep–early Oct spring flowering window in Brazil. If NY option implied vols fade in late August, this could set up a volatility play.
Given the sharp correction over nine weeks, some bottom-fishing is possible on seasonal grounds. While no weather threats are currently in play, July remains a meaningful frost-risk month and could keep some Brazilian sellers sidelined. Still, if two-week weather forecasts stay benign, the $3 level looks historically elevated—potentially forcing stubborn longs to capitulate.
In short: near-term, the market looks oversold, with tactical “back-and-fill” trading likely. Both NY and London markets remain in backwardation into early 2027.
