Arabica Rebounds: Brazil Drought Fears Drive Price Surge Despite Tariff Removal Pressure
Dubai – Qahwa World
Arabica coffee futures experienced a strong rally today, Monday, fueled by renewed concerns over Brazil’s current crop conditions. This upward movement reflects the market’s conflicting forces, which are still reacting to the executive order on tariff removal issued late last week.
March Arabica coffee futures (KCH26) surged by $7.40 (+2.00%) today, following a report highlighting alarming dry conditions in Brazil. Somar Meteorologia reported that Minas Gerais, the country’s largest Arabica-growing state, received only 26.4 mm of rain in the week ended November 21, amounting to just 49% of the historical average. This significant rainfall deficit raises concerns about the health and development of the current crop, providing strong support for the market price.
Further bolstering the price are shrinking stockpiles. ICE-monitored Arabica inventories have fallen to a 1.75-year low of 398,645 bags. This inventory drawdown is a direct consequence of previously imposed US tariffs on Brazilian coffee imports, which led American buyers to void new contracts, severely tightening US supplies, as Brazil typically supplies about a third of America’s unroasted coffee.
Despite today’s rally, prices remain near the 7-week low recorded in the previous session. That sharp decline was triggered by the US President signing an executive order late last Thursday, exempting Brazilian agricultural products, including green coffee, from the existing 40% tariffs. This tariff removal, which does not cover instant coffee, created immediate downward pressure as traders anticipated a greater influx of Brazilian supply into the US market.
Longer-term expectations for Brazil’s next crop continue to act as a bearish factor. StoneX analysts last week forecast that Brazil will produce 70.7 million bags of coffee in the 2026/27 season, including 47.2 million bags of Arabica, representing a projected 29% year-on-year increase. Furthermore, Climatempo forecasts suggest heavy rainfall will continue in growing regions this week, providing favorable growth conditions for the subsequent crop.
In the Robusta market, January futures (RMF26) edged lower by 12 points (-0.27%), pressured by forecasts for drier weather in Vietnam. Improved dry conditions are expected to allow the resumption of the Robusta harvest in key provinces like Dak Lak, easing supply delay concerns in Vietnam, the world’s largest Robusta producer. Official data previously showed that Vietnam’s coffee exports for January through October 2025 rose 13.4% year-on-year.
