Coffee Market:

Coffee prices ended the week in negative territory, with Arabica coffee (NY) down 2.9% to $379.95/lb and Robusta coffee (London) falling 3.2% to $5,337/ton. This downward movement was driven by weather factors, technical adjustments, and exchange rate volatility, which influenced prices on international exchanges.

The coffee market faced strong volatility, with weather conditions in Brazil and Vietnam being the main drivers of price fluctuations. In Brazil, concerns over drought in coffee-producing regions were eased by forecasts of heavier rainfall, especially in Minas Gerais, Espírito Santo, and Bahia. This relief in water stress contributed to price adjustments, but the market remains cautious about alternating periods of rain and drought in the coming months, which could continue to create uncertainties.

Vietnam also faced weather challenges, as a lack of rain could impact the flowering period. However, forecasts of increased humidity in the coming weeks brought some hope for crop recovery, influencing Robusta price dynamics. The upcoming Conilon/Robusta harvest in Brazil, which begins in April, is also expected to impact the market. However, low stock levels in Brazil and uncertain weather conditions in Asia continue to drive uncertainty.

Additionally, stock data released by the European Coffee Federation (ECF) showed a decline of 1.7 million bags in January and February, which is a normal seasonal movement. This drop was smaller than the decline in global coffee exports reported by the International Coffee Organization (ICO), indicating a possible slowdown in coffee consumption in the European market.

This scenario of low stocks and the prospect of a smaller Brazilian crop in 2025, especially for Arabica, continue to create tension in the market. Brazil’s accelerated exports, which reached 33.4 million bags between July 2024 and February 2025, have further reduced available supply. The expectation is for extremely low carryover stocks at the end of the commercial season, which could put upward pressure on prices in the coming months.

Finally, market volatility persists, driven by weather conditions in Brazil and Asia, coffee shortages in Brazil, and supply and demand dynamics shaping coffee prices. The outlook remains uncertain, with investors awaiting more information on the crop and weather conditions before adjusting their forecasts.

Financial Market:

The week was marked by increased risk aversion in the international market, with investors focused on the impact of the U.S. government’s new tariffs on imported vehicles. These 25% tariffs, set to take effect on April 2, will primarily affect Germany, Canada, and Mexico. The immediate impact was seen in the decline of automaker stocks, which carry significant weight in global stock indices. Uncertainty about the economic effects of these tariffs continues to loom over the market, increasing volatility.

In the United States, the February PCE (Personal Consumption Expenditures) index showed that inflation remains persistent, with core inflation exceeding expectations. This scenario suggests that the Federal Reserve (Fed) is likely to maintain interest rates at a high level (4.25% to 4.5%) for an extended period, raising concerns about economic growth and the risk of recession.

Additionally, the March payroll report, set to be released next week, will be a key indicator for assessing the health of the U.S. labor market. Investors are closely watching this data to determine whether recent public sector layoffs have impacted job creation. Tensions are also rising regarding other U.S. economic indicators, such as the ISM manufacturing and services indices and the trade balance, which could provide further insights into the direction of the American economy.

Analysis by Adelso Zamprogno, trader at Royalty Coffees.