Coffee Market Eyes Trump–Brazil Tariff Talks

COFFEE

December Coffee was higher overnight, trading right up to the 9-day moving average that it fell through during its collapse last week. The meeting next week between President Trump and the Brazilian President has offered some guarded optimism that the 50% tariff on Brazilian coffee imports could be revised, but traders are cautious nonetheless. The tariff has helped support a rally off the July lows, as it left US buyer scrambling to procure supplies. This included a drain on ICE exchange stocks, which has continued through the decline in prices this week. Recent rainfall in Brazilian growing areas has eased concerns about the upcoming crop to some degree, but only on ideas that it suggests a change in the weather pattern. Brazil coffee areas still need rain to induce flowering and pollination. World Weather Inc says some areas have received enough rain for flowering this week but that the precipitation has been poorly distributed.  Net drying is expected through Monday before the opportunity for greater rain comes next week.  Rainfall during that period will vary from 2 to 13 millimeters with a few chance of up to 20 millimeters. The follow up precipitation may support pollination for those crops that were induced into flowering by this week’s rainfall, but greater rain will be needed to trigger more widespread flowering. Vietnam could be impacted by two tropical cyclones during the next week that could cause flooding and damage. The threat is primarily to the north, away from central coffee region, but some coffee areas could be affects. The first storm, Typhoon Ragasa, is expected to move over portions of northern Vietnam today. The next is Tropical Storm Bualoi, which  is expected to hit landfall in northern Vietnam next week.

SUGAR

After a two-day  bounce, March Sugar is lower this morning, and if not approaching the contract low from Wednesday, it is vulnerable to a move back there. Selling momentum does appear to be slowing, with the latest move lower accompanied by lower volume and open interest and divergence with momentum indicators, but so far that is the only indicator of a potential bottom. Recent supply news has been overwhelmingly bearish, with good monsoon rainfall in India and Thailand this year, recent private forecasts calling a global surplus, and better Brazilian production as the season has progressed. Brazil’s center south region is expected to see some welcome rain this week that will improve topsoil moisture.

COCOA

There are some ideas floating around that origin hedge selling ahead of the start of the 2025/26 season on October 1 was behind the recent selloff and that now that prices have fallen back to the vicinity of the July low at 6700, buying has emerged. The prospect of a further delay in the implementation of the EU’s anti-deforestation law would mean that there is less of a threat that west African growers would be stuck looking for buyers. It may also lower the chance of a squeeze on the cocoa supplies meeting the law’s requirements. One trader told Bloomberg that the delay would take pressure off supply chains and exchange inventories in Europe, thus avoiding a situation like the one in the coffee market where the 50% tariffs on Brazilian coffee into the US led to a draining of ICE stocks. The story of the delay is being described as “bearish’ for the cocoa market, but prices had already sold off almost $200 from the August 11 high before the story broke, and the market is up slightly in its wake. A Bloomberg survey of traders and analysts is projecting a global production surplus of 186,000 tons for the 2025/26 season. World Weather Inc. says routinely occurring rainfall will continue through the next week in cocoa production areas from Ivory Coast to Nigeria and Cameroon.  All production areas will eventually be impacted, and much of the region will get rain multiple times. The precipitation will be sufficient in maintaining an improving trend in soil moisture and crop development after a delay in the start of the second rainy season. The Ivory Coast Coffee and Cocoa Council reported that the nation has granted cocoa export licenses to 109 companies and cooperatives for the 2025/26 season, which is up slightly from 106 last season, which may be an indication of healthy demand and/or expectations of more supply being available this year.

COTTON

December Cotton has given up its gains from Tuesday and is back near the bottom of a five-month trading range. The market appears to find buyers around the 66-cent area but has trouble maintaining any sort of rally. US exports sales are slow, and the recent bounce in the dollar does not help US competitiveness. The threat of a government shutdown does not help demand expectations and adds to the negative tone. US crop conditions deteriorated slightly this week, but they are still ahead of normal for this time of year, especially in Texas. World Weather Inc. expects a drier and warmer biased weather pattern in West Texas for at least the next ten days, which should be good for developing and maturing late season bolls. The bulls will be hoping for some improvement in today’s Export Sales Report.

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