Coffee Nears Record as Speculators Buy on Brazil Crop Fears

Coffee futures hovered near an all-time high in choppy trading as market speculators bet on fears that tariffs and drought will lead to fewer supplies from top grower Brazil.

(Bloomberg) -- Coffee futures hovered near an all-time high in choppy trading as market speculators bet on fears that tariffs and drought will lead to fewer supplies from top grower Brazil.

The most-active arabica contract in New York on Tuesday touched $4.24 a pound — just below the all-time high of $4.2995 reached in February. Futures are up about 50% since early August, supported by concerns that Brazilian supplies won’t be enough to fully replenish shrinking inventories.

The surge above $4 was driven by buying activity from market speculators in low volume conditions, according to a note from trader I & M Smith Ltd. The upward momentum triggered even more purchases, “with a void of selling activity to meet the upside.”

Speculative buying has increased “especially after the release of Brazilian export data for August and the continued drop in certified arabica stocks,” said Laleska Moda, an analyst at Hedgepoint Global Markets. “Shipments from Brazil are dropping in general to most destinations, but we saw a sharper drop to the US due to tariffs.”

Arabica inventories at exchange-monitored warehouses have fallen to the lowest since April 2024, underscoring supply tightness. Meanwhile, the market remains on edge over weather forecasts in Brazil. Coffee trader Sucafina SA sees a normal seasonal return to the Brazilian rainy season this week, quantitative trader Ilya Byzov said. But rains are so far expected to be too sparse to restore soil moisture in coffee-growing regions in the Southeast, according to a report from Climatempo meteorologist Nadiara Pereira.

The Intercontinental Exchange on Monday raised its margin requirements for arabica contracts, a standard move in response to higher market volatility that can make it costlier for traders to maintain positions. The new outright margin requirement for the most-active December contract is now above $10,000, a 13% jump from the prior level.