Brazil’s Drought Tightens Supply
10-22-2025
From The Trading Desk at Stipelis
The Strategy Session
Arabica coffee futures continue to climb, extending a rally that now stands more than 55% year over year and roughly 29% year-to-date, trading near 419.15 cents per pound. The move has been fueled by a combination of weather stress in Brazil, tightening ICE exchange inventories, and increasing speculative interest.
Brazil’s persistent drought is reducing both yield and bean quality, while U.S. tariffs on Brazilian and Vietnamese imports are adding to cost pressures across the global supply chain. Meanwhile, certified stocks in ICE warehouses continue to draw down, reflecting both stronger physical demand and limited replenishment.
Momentum indicators are showing elevated readings: the RSI near 71 suggests overbought conditions, yet price remains above the 50-day moving average at 375 and 200-day average at 359, reinforcing the uptrend. The weekly pivot sits near 396.38, and today’s intraday resistance targets 423.05 to 431.10, which may serve as near-term testing zones.
From a tactical perspective, volatility remains moderate. The ATR at 15 and the stochastic readings above 80 indicate short-term strength but potential for profit-taking. Still, open interest remains robust at 176,952 contracts, suggesting conviction among both hedgers and funds.
Beyond near-term price movement, the broader coffee story remains compelling. Global consumption is projected to exceed 178 million 60-kg bags in 2025, driven by the ongoing expansion of café culture in Asia and the Middle East and a shift toward premiumization and specialty grades. The total market value is estimated near $473 billion, with AI-enabled precision agriculture supporting future productivity gains.
For market participants, this environment favors disciplined, risk-aware positioning. Producers and exporters continue to hedge forward production, while managed money maintains a heavy net-long exposure. With the Dollar Index steady at 98.77 and energy markets modestly higher, relative commodity strength supports continued upside bias in coffee, though seasonal volatility could create short-term pullbacks.
At Stipelis, we’re tracking this market closely as part of our agricultural sector outlook. For traders and allocators alike, the coffee curve reflects not just supply stress—but a broader shift in global consumption behavior and capital flow within soft commodities.
Let’s stay in touch. Let’s follow these markets together.
Stephen Coleman
Owner Stipelis Global Trading LLC