#009 - The January Turning Point: How Brazil’s Rain Shifted the 2026 Narrative

We have been trying to focus on durable insights that help us all make better decisions, without chasing short term predictions. But January 2026 is especially relevant.

January matters because it’s a peak rainfall month in Brazil’s main coffee regions. Brazil is the world’s largest producer, accounting for roughly 35-40% of global supply. And a special area in Minas Gerais contributes to about 45-55% of Brazil’s total coffee output. So, we just use this area as a proxy for coffee production.

On top of that, January and February together deliver roughly 40% of annual precipitation in these areas, making them vital for flowering, fruit set, and early bean filling in the developing crop. As such, producers treat January as a leading indicator for February and the overall season. Good rains support healthier plants and stronger yields; shortfalls can restrict supply, push short-term prices higher, invert futures curves, and reduce inventories.

The chain is straightforward: Low rains → supply restrictions → high near-term prices → inverted curve → low stocks. We’ve seen this dynamic in recent cycles. And the market has been in recovery mode.

Our proxies are the municipality of Patrocínio and the broader state of Minas Gerais.

This January began dry and tense. Early weeks showed below-average rain in key spots. Some areas recorded 136-140 mm for the month—vs. historical average of about 234 mm. Then, mid-month reports noted patchy precipitation, such as 33.9 mm in one week (53% of normal), raising concerns about stress on cherries. Agriculture media flagged these risks, and the inverted curve persisted as a sign of ongoing supply caution.

Then conditions improved. Late January brought heavier, more consistent showers. There was intense rain and local flooding. Forecasts indicated continued precipitation into early February, replenishing soil moisture and aiding bean development. The industry mood shifted —from concern to relief.

Coffee prices responded: Arabica prices fell to multi-month lows.

We tend to believe because traders absorbed the better weather outlook and expectations for crop progress. However, there is just so much more to influence these prices.

We hold to our approach: no short-term forecasts about supply and demand. Fundamentals evolve fast and we avoid overinterpreting every change. But human psychology remains consistent. These rains eased the outlook.

Regarding market prices, we simply don’t know. The dip might also reflect broader financial trends — maybe linked to other assets, such as Bitcoin or the stock markets.

We simply keep our focus on importing great coffee at a fair price.

Weekly Highlights:

• Coffee Futures C Price (Arabica, ICE NY): -5.32% weekly.

• Coffee Price (Arabica 4/5 Futures, B3 Brazil, in USD): -1.11% weekly

• BRL/USD Exchange Rate: +0.63% (Brazilian Real strengthened) weekly

• Proxy for 20’ Container Freight Rates (Santos to Rotterdam): ≈ -0%

• US Customs issued a withhold release order on Mexican coffee from Finca Monte Grande due to forced labor concerns, impacting imports and highlighting governmental enforcement on ethical sourcing.

• Starbucks faced scrutiny over its C.A.F.E. Practices program, accused of shifting $1.3 billion in profits to Switzerland, affecting producer countries’ revenues and prompting calls for regulatory review.

• Coffee franchises dominated the Franchise 500 list, with strategic expansions emphasizing consumer demand for convenient, on-the-go coffee habits amid rising RTD preferences.

• De’Longhi reported a 13.7% revenue surge driven by coffee tech innovations, reflecting strategic investments in home brewing to cater to evolving consumer habits post-pandemic.

• Functional RTD coffee sales grew, with brands like Nestlé launching adaptogen-infused products to align with health-focused consuming trends.

• India excluded coffee and other sensitive items from tariff reductions in the India-EU FTA, a governmental decision protecting domestic producers from import competition.

• Coffee Holding Company noted eased tariff impacts for 2026 after US eliminations, a strategic relief enabling better inventory management and pricing decisions.

• Discussions on corporate power in coffee highlighted M&A trends, with large firms consolidating to dominate supply chains, affecting small businesses’ strategic options.

• Trim, Ireland, initiated a waste reduction program targeting disposable coffee cups, influencing local consuming habits toward sustainability via community rules.