Trump cancels Brazil food tariffs, coffee futures plummet to a 7-week low

Market Reaction Preview

Coffee futures fell collectively on Friday: Arabica coffee (March contract) dropped by 1.91%, Robusta coffee (January contract) fell by 2.70%, with Arabica hitting a 7-week low. The trigger was Trump signing an executive order on Thursday evening to remove Brazilian food products from the tariff list — this includes the highly watched 40% tariff on Brazilian coffee.

Brazil Supply Pressure Relief

The key variable comes from the foreign exchange market: the Brazilian real has fallen to a five-week low against the dollar, which is good news for Brazilian coffee producers - a weak currency encourages exports. The problem is that previous tariff measures from the U.S. have severely impacted imports: from August to October, U.S. imports of coffee from Brazil plummeted by 52% year-on-year to about one million bags. Now that tariffs have been lifted, the pent-up purchasing demand may be released all at once, which could actually push prices down.

With the addition of meteorological factors supporting crop growth, Brazilian coffee faces supply-side pressures. The meteorological agency Climatempo forecasts heavy rain in Brazilian coffee-growing areas in the coming week. More bearish is the fact that Brazil's crop forecasting agency Conab has lowered its coffee production estimate for 2025 to 55.2 million bags (a 0.9% reduction), but StoneX predicts that Brazilian production could rebound significantly to 70.7 million bags in 2026/27, an increase of 29%—which puts pressure on future prices.

Inventory Bottoming Out and Vietnam Threat

ICE coffee inventories have fallen to their limits: Arabica stocks dropped to 398,645 bags on Thursday, the lowest in 1.75 years, while Robusta stocks fell to 5,567 lots on Friday, the lowest since April. This should have supported prices, but expectations of increased supply from Vietnam have outweighed this positive news.

Vietnam (the world's largest Robusta producer) saw a 13.4% year-on-year increase in coffee exports to 1.31 million tons in the first ten months of this year. More critically, Vietnam's production is expected to increase by 6% year-on-year to 17.6 million tons in the 2025/26 season, reaching a four-year high. If the weather cooperates, production could rise by another 10%. This directly impacts the price of Robusta.

Global Supply Chain Reversal

The International Coffee Organization (ICO) data shows that global coffee exports for the current marketing year have actually declined by 0.3% to 138.658 million bags – seemingly good news, but the U.S. Department of Agriculture predicts that global coffee production will reach a record 178.68 million bags in 2025/26, an increase of 2.5%. Brazil's production slightly increased by 0.5% to 65 million bags, while Vietnam's increased by 6.9% to 31 million bags. However, Arabica production has decreased by 1.7% year-on-year to 97 million bags.

Investment Insights

In the short term, the removal of tariffs will release suppressed Brazilian supply, combined with the rainy season being favorable for crop growth, putting pressure on coffee prices. However, the key in the medium term is the speed of replenishing Brazilian stocks and the actual performance of the weather in Vietnam—both will determine the price direction in the coming months. Current stocks are at their limits, and the risk of a rebound should not be underestimated.