#027 - Breaking the Cycle: Why the Best Brazilian Coffee is Staying at Home

Hi

André and I just returned from a 20-day roadshow in Europe. Meanwhile, back home, our family has just started working on the 2026 harvest. Expectations are high; overall volumes in Brazil are projected to grow by 15%, driven partly by the crop's biennial cycle and partly by expanded planting areas.

In our case, looking at these expanding areas is almost funny. These trees were planted back in 2022–2023, a time when the war in Ukraine drove oil and fertilizer prices to record highs while coffee prices remained flat. I remember my father cutting our fertilization schedule from three times a year to two right after the war started just to save money. Yet, only a few months later, he was expanding. That initial cut reduced yields, which subsequently drove up prices and ultimately incentivized planting new trees. It was the classic coffee cycle playing out right in front of our eyes.

Among European coffee buyers, there is a clear consensus that prices are headed down, and everyone is waiting it out before rebuilding their inventory. It appears the Coffee 'C' price has already dropped in anticipation of this increasing supply.

However, market consensus is rarely a reliable long-term reference. Interestingly, coffee prices seem to be falling in lockstep with Bitcoin this year: in 2026, Coffee is down 26% while Bitcoin is down 28%. It is frankly bizarre to see an entire, tangible value chain pegging its prices to an indicator as volatile and disconnected as the NYC 'C' Price.

Instead of riding these waves, we are focusing on cultivating long-term partnerships that prioritize transparency and stability. We see a massive opportunity here.

At the same time, the most sophisticated European roasters are actively hunting for fresh microlots, and we have already secured a few of these lots to ship to Europe as soon as possible. Interestingly, we are also watching the Brazilian domestic market mature rapidly. Local boutique roasters are increasingly willing to pay a premium for top-tier quality. In fact, this domestic demand is a major reason why European roasters have to dedicate so much of their marketing to Ethiopian beans—because the best Brazilian coffees are staying right here in Brazil.

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Weekly Highlights:

• Coffee Futures KC Price in NY: -2.20% weekly, closing at 271.75 cents/lb.

• Coffee Price in Brazil's B3 in USD: -3.47% weekly, closing at 306.00 USD per 60kg bag.

• BRL/USD fx rate: +1.32% weekly

• Proxy of 20' container freight prices from Santos to Rotterdam: down ~3.5% weekly

• EUDR Entry Deadline Approaches for SMEs: The European Union Deforestation Regulation (EUDR) is officially entering force for Small and Medium Enterprises (SMEs) on June 30, 2026, forcing a structural scramble for plot-level geolocation data in coffee supply chains.

• Traceability Reorders Sourcing Hierarchies: Under newly active EUDR frameworks, EU buyers are aggressively favoring origins like Colombia due to its robust centralized geolocation mapping infrastructure over less digitized origins.

• Supply Chain Shifting Burdens Uphill: A new June 2026 impact report revealed that EU coffee buyers are largely failing to co-finance compliance costs, forcing Latin American smallholders to absorb thousands in GPS-mapping expenses.

• Brazil Projections Cement Record Crop Era: Fresh market updates from StoneX and Marex point to a record-shattering Brazil 2026/27 crop potentially exceeding 75 million bags, triggering a major global bearish correction phase.

• Market Flips to a Massive Surplus: Due to massive production rebounds in Brazil and Vietnam, the coffee complex is projected to swing from a narrow 1.8-million-bag surplus in 2025 to a whopping 10-million-bag surplus across 2026.

• U.S. Retail Coffee Hits Historic Peak: Pass-through impacts from high 2025 green coffee costs peaked with retail prices reaching a record $9.72 per pound, causing roasters to pivot to lower-cost robusta blends.

• Cold Ready Formats Drive Nestlé's Growth: Nestlé successfully captured the surging Gen Z demand for all-day iced caffeine routines by reporting robust 7.3% organic growth, heavily backed by its new "Nescafé Iced Blend" and café concentrates.

• Starbucks Transformed by Transaction Counts: In its latest FY26 performance cycle, Starbucks proved consumer demand remains strong but value-sensitive, logging a 4% global comparable store sales increase driven heavily by higher volume transactions rather than premium prices.

• Private Label Brands Edge Out Premium Café Segments: Intense price sensitivity across European and North American grocery aisles is driving a major strategic pivot toward supermarket private-label lines over premium out-of-home café options.

• Strategic Consolidations Reshape Global Logistics: The closing phases of major transportation mergers, alongside localized port gridlocks at hubs like Santos, have prompted major coffee traders to execute strategic long-term freight volume commitments to secure predictable shipping lanes.