Following the analysis published on our blog in recent weeks, the coffee market is showing fresh signs of tension in the short term. International prices have started to rise again, with a significant recovery for both Arabica and Robusta, bringing an end to the period of weakness seen at the start of the year.

This development does not yet alter the medium-term outlook, but it does highlight how the market remains extremely sensitive to external factors, particularly in terms of supply and global logistics.

In questo aggiornamento ci concentriamo sui driver più recenti, con un’attenzione specifica al ruolo crescente delle tensioni geopolitiche.

The Middle East: the geopolitical factor takes centre stage once again

The main factor marking a break from previous weeks is the escalation of tensions in the Middle East and their direct impact on global logistics.

The increase in risks along major shipping routes is putting significant pressure on the entire supply chain:

• rise in shipping costs
• rise in insurance premiums
• greater variability in delivery times
• the need for longer and more expensive alternative routes

These factors are also having a tangible impact on the coffee market, which relies heavily on efficient and predictable global logistics flows.

The result is an increase in the so-called ‘logistic risk premium’, which is reflected in prices and helps to amplify movements in futures markets. In an already fragile environment, the geopolitical factor thus acts as a volatility multiplier.

Brazil: Slowing sales and a tighter physical market

The behaviour of Brazilian producers, who continue to adopt a cautious approach to sales, is helping to further support the market in the short term.

Compared with last year, the proportion of the harvest already sold is lower, indicating a wait-and-see approach aimed at capitalising on higher prices. This slowdown in sales has a direct impact on immediate availability.

The physical market is therefore more rigid, with lower volumes readily available and greater sensitivity to external shocks, including those of a geopolitical nature.

Export figures also confirm this trend, helping to underpin prices in the short term.

Availability and stock: a balance that remains fragile

The latest updates on certified stocks indicate a partial recovery on a month-on-month basis, but the year-on-year comparison remains negative.

In particular, the supply of Arabica coffee remains limited compared with last year’s levels, with a significant decline in Brazilian supplies.

As previously highlighted in earlier analyses, the key issue is not so much expected production as immediate availability. When stock levels are low, even minor fluctuations in trade or logistics flows can lead to amplified price reactions.

A two-speed scenario

The latest developments confirm a pattern that has become all too familiar in the coffee market.

In the short term, prices are being supported by a combination of factors:

• offer held up in Brazil
• limited physical availability
• rise in logistics costs linked to tensions in the Middle East

In the medium term, however, the prospects for a rebalancing remain open, linked mainly to production trends in the main exporting countries.

This divergence between the short and medium term continues to create an unstable environment, in which the market reacts swiftly to every new piece of information.

Conclusions

The current state of the coffee market confirms a shift in the status quo that has already become apparent in recent months: volatility is no longer sporadic, but structural.

Recent developments have heightened the influence of geopolitical factors, which now interact with traditional supply and demand dynamics and amplify their effects.

For those involved in the supply chain, it is therefore becoming increasingly important to monitor not only agricultural fundamentals, but also developments in the international landscape and logistics routes.

For a more comprehensive analysis of the structural drivers of the coffee market, please refer to the in-depth articles already published on the Qahwa Limited blog.