Coffee futures continued their upward trajectory this week, with the December contract gaining 13.9 cents to close at 413.55 US cents per pound on Tuesday. The increase defied earlier expectations for a market correction to 370 cents, which were based on anticipated beneficial rainfall in Brazil’s Arabica-growing regions.
While the expected rainfall did materialize in Brazil, alleviating immediate concerns about the upcoming crop, the market’s attention remained firmly fixed on near-term coffee availability. Certified stocks continued to decline throughout the week, indicating that coffee is being sold on the spot market to meet immediate demand, particularly from US buyers.
The supply situation has become more complex due to escalating tensions between the United States and Colombia. As the second-largest supplier of coffee to the US market after Brazil, any potential tariff escalations with Colombia could create significant disruptions for American roasters already grappling with near-record high prices.
The tight spot market conditions are reflected in the December-March spread, which currently trades at a premium of 23 cents. Should the US government announce additional punitive tariffs on Colombian coffee without exemptions, analysts anticipate the market could breach previous highs of 425 US cents per pound.
However, if tariff announcements can be delayed or coordinated with potential negotiations to eliminate existing punitive tariffs on Brazilian coffee, the market is expected to stabilize below the $4 per pound mark.
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