FX.co ★ Coffee Futures Rise to 4-Week High

Arabica coffee futures surged beyond $4.00 per pound, marking the highest level in four weeks. This rise is attributed to ongoing dry conditions in Brazil's primary coffee-producing region, intensifying concerns about supply. According to meteorological data from Somar, Minas Gerais, a key area for Brazil’s arabica coffee production, experienced only 48% of its average rainfall in the week leading up to October 11, posing a threat to the flowering of the 2026/27 crop. Simultaneously, inventories on the ICE exchange have been declining, with arabica stocks reaching a 1.5-year low of 498,088 bags, and robusta stocks hitting a 2.75-month low. The situation has been aggravated by 50% US tariffs on Brazilian coffee, causing American buyers to cancel contracts and further depleting the domestic supply, given that Brazil accounts for roughly one-third of the United States' unroasted coffee imports. Moreover, the National Oceanic and Atmospheric Administration (NOAA) increased the likelihood of a La Niña event to 71%, which could worsen Brazil’s drought conditions. Reflecting these challenges, Brazil’s crop agency, Conab, reduced its 2025 arabica production forecast by 4.9% to 35.2 million bags.