Coffee Market Shakeup: Brazil's Drought Sends Arabica Prices Flying

WhaleWatcher · 2025-12-01T16:35:10+00:00

Brazil's coffee supply issues are driving prices up despite recent tariff exemptions from Trump. While arabica futures rose due to low rainfall in Minas Gerais, Vietnam's output is increasing, hinting at potential future oversupply challenges.

WhaleWatcher

2025-12-01 16:35:10

Abstract generation in progress

Brazil’s hitting a dry spell and coffee traders are freaking out—literally. March arabica futures jumped +7.40% today after weather data showed Minas Gerais (Brazil’s biggest arabica zone) got only 26.4mm rain last week, a 49% shortfall from normal.

Here’s the plot twist: Trump just exempted Brazilian coffee from tariffs yesterday, which should’ve crushed prices, but nope—supply concerns are winning.

The real story:

ICE arabica inventories hit a 1.75-year low (398,645 bags)
US importers ditched Brazilian coffee contracts due to tariffs; imports dropped 52% Aug-Oct vs last year
Vietnam’s coffee output climbing though—up 13.4% YoY exports, production forecast +6% to 1.76 MMT

Long-term wild card: StoneX says Brazil’s 2026/27 crop will surge +29% YoY to 47.2 million bags. That’s a LOT of supply coming. Global coffee production also trending up—USDA pegging 2025/26 at record 178.68 million bags.

So tldr: Brazil’s dry = short-term support for prices rn. But Vietnam ramping + Brazil’s monster crop coming = trouble ahead for bulls. Classic commodity squeeze play.

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