Coffee Prices Hit Record High on Brazil’s Tariffs and Critical Supply Shortages

TradingKey - Driven by U.S. tariffs of up to 50% on Brazil and persistent drought conditions in Brazil, coffee prices have surged over 55% since their July lows, reaching a new all-time high on October 23.

As of writing, C-Market Arabica futures rose 3.83% on the day to $436.95 per pound. In October alone, coffee prices are up 14% — far outpacing gold’s 6.87% gain and silver’s 5.32% rise during the same period.

Supply Crunch from Brazil Fuels the Rally

The sustained surge in coffee prices is primarily driven by mounting challenges in Brazil, which supplies 40% of the world’s coffee. Key factors include:

• 50% U.S. tariffs on Brazilian exports, imposed starting in July
• Severe drought leading to rapidly shrinking production
• Insufficient supply response from other global producers to fill the gap

Commtrendz Research, a commodities research firm, noted that after President Donald Trump announced the 50% tariff on Brazilian coffee, traders have been delaying new contracts with Brazilian suppliers.

Data shows that U.S. inventory levels of Brazilian green coffee beans have fallen to their lowest since 2020. With the tariff impact ongoing, President Trump has also threatened to impose tariffs on Colombia, another major coffee exporter.

Brazil and Colombia represent the two largest sources of green coffee beans for the U.S. market. The expectation that Colombian supply could offset Brazilian shortfalls has weakened amid rising trade risks.

Drought Worsens, Rainfall Falls Short

Alarmingly, Brazil’s severe drought shows no signs of easing. Over the past month, parts of Minas Gerais, the country’s key coffee-producing region, received only 70% of normal rainfall. Last week, rainfall in the area was less than half the historical average.

Industry insiders emphasize that while tariffs are exacerbating the situation, the core issue remains structural and supply-driven:

“There's still the climate issue. These tariffs, they're an additional layer, but we can't ignore the main, structural factor, which is the tighter supply.”

With harvests already compromised and inventories critically low, any further weather disruptions could push prices even higher.