Coffee futures are heading for a significant price correction, with expectations pointing to a drop to around $3.50 per pound before stabilizing. This marks a substantial shift from the current level of 391.55 US cents per pound recorded this week for the December contract.

The anticipated decline follows a 14.5 cent drop from Monday to Monday, driven by multiple converging market factors that are reshaping the near-term outlook for coffee procurement.

Tariff tensions subside

Political developments are playing a central role in the shifting price dynamics. US President Trump’s specific mention of the need to lower coffee prices following his meeting with Brazilian President Lula in Malaysia on Sunday has signaled potential relief on the tariff front.

The market had been closely watching for tariff announcements from the Trump administration, particularly regarding Colombia. Additional tariffs would have pushed prices to new highs, while signs of relief were expected to pull prices back below $4 per pound. The latter scenario is now unfolding, with most market participants anticipating forthcoming tariff relief that removes a major source of near-term tightness.

Production conditions support bearish outlook

Beyond political factors, production developments are reinforcing the downward pressure on prices. Brazil has experienced nearly ideal conditions this week, strengthening confidence in the potential for the 2026/27 crop.

Meanwhile, outlook assessments for nearby Vietnamese and Indonesian Robusta crops have been raised. This improved supply picture is materializing at a time when Robusta usage tends to peak seasonally, adding further weight to the bearish sentiment.

Price spreads drive substitution

The growing price differential between Arabica and Robusta is creating additional market dynamics. With Arabica trading at almost twice the price of Robusta, roasters with flexible blend capabilities are increasingly considering switches in their formulations.

This substitution pressure is resulting in increased nearby pressure on Robusta at the expense of Arabica demand, contributing to the overall market rebalancing.

The expected price drop to around $3.50 per pound is anticipated before support emerges from the index roll period, presenting a notable shift in market conditions for coffee buyers and sellers in the coming weeks.



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