DUBAI – QAHWA

January 2026 was not merely the start of a new calendar year for the International Coffee Organization (ICO); it served as a critical testing ground for the resilience of global supply chains against dual shocks: climatic in the primary production origin (Brazil) and logistical in vital waterways. The ICO Composite Indicator Price (I-CIP) averaged 296.89 US cents/lb, a 2.6% decrease from December 2025. While this figure may appear as a slight retreat, a deep dive into daily market movements reveals a state of “silent boiling” that culminated in a sharp price collapse in the final three days of the month, ending a long period of relative stability since late 2025.

  • I. Price Psychology and the “Minas Gerais” Effect

Prices entered January in a state of “cautious balance” (range-bound), lacking clear directional catalysts. Prices fluctuated within a narrow band, interpreted by analysts as being high enough to keep farmers financially satisfied but not low enough to trigger aggressive stock liquidations. However, this calm was shattered by two opposing factors:

Currency Impact and Hedging (Early Month): In the first week, around January 6th, the indicator rose by 3.2%. This increase was driven not by supply shortages, but by the strength of the Brazilian Real. The positive correlation between the Real’s strength and global coffee prices is a classic driver; a stronger local currency reduces export incentives for Brazilian farmers who then prefer selling in the domestic market (CEPEA index), which offered attractive premiums over international prices, creating temporary upward pressure.

The Saving Rain Shock (End of Month): A dramatic shift occurred between January 27th and 30th, with the market losing over 21 cents in a flash. Eyes were glued to weather maps over Minas Gerais, the heart of Brazil’s coffee production. Reports of heavy, consistent rainfall dissipated the “risk premium” previously added by traders fearing drought. This precipitation not only improved the current crop’s condition but provided strong positive signals for the 2026/2027 season, prompting investment funds and speculators to liquidate long positions, causing the indicator to drop to 283.02 cents.

  • 2. Structural Shifts in Demand (Robusta as the New Leader)

The report reveals a significant economic phenomenon: diverging performance among the four main coffee groups. While Arabica varieties suffered sharp declines—up to 4.5% in the “Other Milds” category—Robusta was the only group to achieve positive growth (1.0%), stabilizing at 192.52 cents. This divergence is no coincidence; it is the result of a “structural” shift in the global coffee industry. Amid rising global living costs, major international roasters have begun adjusting “blends” to increase the proportion of Robusta to lower final costs for consumers. This sustained demand for Robusta narrowed the price gap (arbitrage) between the New York and London exchanges by 8.4%, signaling that Robusta is emerging as the actual driver of corporate profit stability.

  • 3. Export Geography: Redrawing the Global Map

Global green coffee exports in December 2025 reached a strong 10.15 million bags, up 9.2%. However, this hides stark regional disparities:

The Central America and Mexico Surge (81.3%): This figure must be read carefully; it reflects “recovery from paralysis” rather than a sudden productivity spike. In December 2024, tropical storms (notably Sara) delayed harvesting, making exports almost non-existent then. In December 2025, stabilized climate allowed coffee to flow normally to ports, resulting in a massive percentage increase compared to the previous year’s “trough.”

Asia and Oceania Leadership (Vietnam & Indonesia): The region grew by 38.4%, led by Vietnam (+30%). Vietnam compensated for early-season harvest delays through improved processing efficiency and the “base effect.” Indonesia and India also saw a combined 61.1% jump, reinforcing Asia’s position as a primary global supplier while South America falters.

South American Contraction (The Persistent Dilemma): For the 14th consecutive month, South America recorded a decline (-15.0%). Brazil fell by 18.5%, and notably, Colombia dropped by 18.9%. The report hypothesizes that Colombia may have reached its “maximum production capacity” due to environmental factors and labor structure changes.

  • 4. Uganda: A Unique African Success Story

Uganda stands out as the “hero” of the African continent, with exports jumping 52.5% in one month. This is the fruit of a national strategy to renew trees and expand Robusta acreage. Uganda aims to export 20 million bags by 2030, and current figures show it is on track, filling the void left by other struggling producers with competitive quality.

  • 5. Logistics: Red Sea Security as a Cooling Factor

A pivotal analytical point is the breakthrough in the Red Sea. Following long-term disruptions, major shipping lines resumed using the Suez Canal by January 12, 2026, after security stabilized. This has a direct price impact:

Reducing “Coffee on Water”: Shortening transit times freed up millions of bags previously held at sea for extra weeks, allowing them to reach European and American ports faster.

Increased Destination Stocks: The availability of coffee in consuming ports reduces “urgent” buying pressure, removing a key price support pillar from last year.

  • 6. Technical Analysis of Stocks and the “Backwardation” Dilemma

Despite export flows, the market faces a technical contradiction called “Backwardation,” where spot prices remain higher than futures. This indicates short-term “hunger” despite long-term optimism. Consequently, certified stocks remain at critical levels (50% of the 5-year average), acting as a “safety valve” that prevents total price collapse.

  • Conclusion and Future Outlook

The January 2026 report clarifies that the global coffee market is moving from a “supply crisis” to a “logistical and climatic rebalancing.” The 2.6% price drop is likely the start of a broader correction in Q1, provided Brazilian rains continue and Suez Canal traffic remains steady.