Coffee Prices Plunge on Signs of Possible Tariff Cuts

Coffee prices are experiencing a significant plunge today, with robusta reaching a two-week low, primarily driven by President Trump's remarks about lowering coffee tariffs and upcoming "substantial announcements" from the Treasury Secretary on non-US crop tariffs. This bearish pressure is amplified by StoneX's forecast for a 29% year-over-year increase in Brazil's 2026/27 coffee production, ample rainfall in Brazil, and strong export growth and production forecasts from Vietnam. While shrinking ICE inventories, US tariffs on Brazilian imports, and a higher likelihood of a La Niña weather pattern in Brazil present some underlying support, these factors are currently outweighed by the immediate supply-side and policy-driven bearish news.

Analysis

Coffee prices are sharply lower today, with December arabica down 3.62% and January robusta falling 5.09% to a two-week low. This immediate downturn is driven by President Trump's comments on lowering tariffs and anticipated "substantial announcements" on non-US crop tariffs, signaling potential policy-driven supply increases.

Further bearish pressure stems from robust supply forecasts; StoneX projects Brazil's 2026/27 coffee production to increase 29% year-over-year, supported by ample rainfall. Concurrently, Vietnam's Jan-Oct 2025 exports rose 13.4% year-over-year, with 2025/26 production forecast to climb 6% to a four-year high, indicating increased global robusta availability. The USDA FAS also projects a 2.5% increase in world coffee production for 2025/26, driven by a 7.9% rise in robusta despite a 1.7% decrease in arabica, boosting ending stocks by 4.9%.

Despite these bearish drivers, potential future price support exists as global coffee exports fell 0.3% year-over-year and ICE arabica/robusta inventories are at multi-month/year lows. US tariffs on Brazilian imports tighten US supplies, while a 71% likelihood of a La Niña system could harm Brazil's 2026/27 crop, and Conab cut its Brazil 2025 arabica forecast by 4.9%.

Key Decisions for Investors

• Monitor upcoming tariff announcements closely, as policy changes could significantly alter import costs and supply dynamics, potentially exacerbating current price declines.
• Consider the short-term bearish sentiment driven by policy and strong near-term supply forecasts from Brazil and Vietnam, which may lead to further price weakness in coffee futures.
• Evaluate long-term positions by balancing current bearish drivers with underlying bullish factors like tightening ICE inventories, US-Brazil tariff impacts, and potential La Niña effects on future Brazilian crops.
• Differentiate between arabica and robusta outlooks, given the projected decrease in arabica production versus a significant increase in robusta, as highlighted by USDA FAS forecasts.