It was supposed to be a quiet period for coffee (with the notable exception of the possibility of a Brazilian frost - thankfully that didn't happen!), but the coffee market had other ideas... Yes, your eyes aren’t deceiving you—the coffee market is running up. Again. And this isn't a casual trot - it's a sprint. The market is up almost a full dollar in the past month and we've been fielding lots of understandable questions about why. So we put this together to hopefully answer some of them for you, based on insights we've heard from traders, the industry, and with some learnings from a trip to Brazil that our Coffee Supply Manager, Jay, took a few weeks back:
The coffee market is experiencing another surge driven by technical trading around First Notice Day (Wednesday, August 20th), historically low roaster coverage, US tariffs on Brazilian (50%), Indonesian (19%), Vietnamese (20%) and worldwide (10% baseline) green coffee, and critically low certified stocks. While supply and weather conditions offer some optimism, volatility remains high and strategic positioning is key as we head into year-end.
Let’s break down what’s driving this surge and what it means for buyers, sellers, and speculators.
Key Market Drivers
1. First Notice Day (FND) Activity
August 20th marked FND, a period known for heavy technical trading. Buyers scramble to secure futures to match physical coffee needs, often switching contracts at the last minute. This flurry of activity tends to push prices up. Speculators thrive in this chaos, leveraging volatility to their advantage.
2. Roaster Coverage at Historic Lows
Roasters are unusually short on futures coverage. The Gross Commercial Long position—a proxy for roaster coverage—is at its lowest level since 2011. The market hit lows a month ago and it seems that there wasn't as much buying done as we might have expected.
3. Brazil Tariffs Disrupt U.S. Buying
A 50% tariff on Brazilian goods is hitting U.S. roasters hard. They’re hoping for a coffee carve-out but are currently scrambling for alternatives to Brazil, which has long been a cost-effective source. Unfortunately, Central American harvests are still months away. Meanwhile, Brazilian producers—flush with profits from recent high prices—can afford to hold inventory longer than most roasters.
4. Certified Stocks Remain Critically Low
Certified coffee stocks are hovering around 730K bags, far below the market’s minimum comfort zone of 1–1.5 million bags. Even worse for U.S. buyers: 600,000+ bags are in Europe. Low stocks, combined with speculative power to inhibit certification or decertify inventory, can easily spook the market.
More Positive (or Neutral) Developments
1. Brazil’s Investment in Supply
Brazilian producers aren’t just holding coffee—they’re upgrading infrastructure. Drip irrigation is becoming widespread, reducing weather-related risks. One producer joked they could irrigate with Evian and still turn a profit. All signs point to a historically large 2026 crop. By November or December, holding excess inventory could become risky for producers as forecasts improve.
2. Favourable Weather Outlook
Long-term forecasts suggest good growing conditions in both Brazil and Vietnam. All bearish sentiment hinges on Brazil’s bumper crop in 2026, so this will be a key area to watch.
What This Means for Us
For now, it’s mostly noise. We believe we’re well-positioned to weather this volatility based on our disciplined approach through all of the volatility, however roasters still needing to secure December futures or physical coffee may face challenges. We expect some market settling by year-end—hopefully sooner—but history shows this market can be stubborn.