The Market Is a Chameleon
October ended practically at the same level where it began. Arabica futures in New York started the month at 290.70 c/lb and closed on Friday, October 30, at 287.20 c/lb. This week alone, following the elections, the market dropped 2,025 points, or 6.59%.
During the month, prices reached a high of 318.20 and a low of 280.80 c/lb, trading within a range of 3,740 points.
The December contract still has 64,377 contracts in open interest (OI), most of which should be liquidated over the next two weeks. Z6 options expire on November 12, and First Notice Day (FND) is November 19. Once again, longs will probably put pressure on shorts during this final stretch, with the Z6/H7 spread currently at +10.4 c/lb.
In Brazilian reais, Arabica Fine Cup with 15% defects and 25% screen retention is trading around BRL 1,620.00 per 60 kg bag in southern Minas Gerais, while the CEPEA index indicates a Brazilian reference price of BRL 1,598.37 per bag.
Still on Arabica, non-commercial funds sold 3,762 contracts, bringing their net position to -1,019 contracts. Interestingly, they continue to significantly increase their spreading positions. Last week, they added 7,562 contracts, and this week another 7,535 contracts. Everyone continues watching what might happen to the Z6/H7 spread over the coming days.
Robust continues to decline. The January 2027 contract closed Friday at USD 3,204/ton, while physical coffee in Brazil is quoted around BRL 920.00 per bag, supported by the stronger US dollar.
In Robusta, non-commercial funds sold 11,399 contracts. The underlying view remains unchanged. Very high inventories in Brazil, increasing certified stocks, and the beginning of the Vietnamese harvest, which is expected to peak in November, are all providing the market with a certain degree of confidence regarding Robusta supplies.
Last week, we discussed how the elections could influence the US dollar and financial markets, and the election results triggered a significant reaction.
Following Lula’s (PT) reelection, the US dollar surged 9.15% during the week, its largest weekly appreciation since 2008, closing Friday near BRL 5.44.
The Ibovespa fell 18.12%, reflecting a sharp repricing of Brazilian assets amid investor concerns about the direction of economic policy and public finances. The main concern is the possibility of increased government spending, worsening public debt, and interest rates remaining elevated for longer. With a higher perception of fiscal risk, investors demand greater returns to finance the government, putting pressure on future interest rates and the exchange rate.
As usual, the market is already pricing at a risk premium. For coffee, a stronger US dollar supports prices in Brazilian reais but also increases volatility and implicit financing costs.
Attention now turns to the composition of the economic team and the first signals from the reelected government, which will be crucial in determining whether this pressure continues or begins to ease.
This week, during a conversation with a European coffee importer, I heard something that really caught my attention. He mentioned that one of his customers, a roasting company, had learned how to use Good Cup instead of the Fine Cup it used to purchase. According to him, it is not that the two coffees have become identical, but rather that the industry found ways to deliver a sufficiently similar result in the cup.
The most attractive aspect, obviously, is the price. While Brazilian Fine Cup is currently trading at a differential close to +25 cents per pound over the New York futures market, Good Cup can be purchased at -4 cents. That is a difference of 29 c/lb, equivalent to approximately USD 38 per 60 kg bag.
That represents significant savings for any industry purchasing thousands of tons of coffee annually.
According to this importer, his customer achieved this result by adjusting roasting profiles, blend compositions, and the sensory characteristics of the final product. In fact, a technical solution to an economic problem.
This conversation made me reflect on something we may be underestimating, although it is something we traders frequently discuss: the extraordinary ability of the coffee market to adapt, constantly transforming itself throughout different production cycles.
For decades, we have learned to classify, value, and trade coffee according to its physical and sensory characteristics. Yet there is an important difference between the technical quality of a coffee and the quality perceived by the person consuming the final product.
Think about European consumers who drink their daily coffee with milk. Or those who add sugar, use capsules, or consume beverages in which coffee represents only part of the composition. To what extent can these consumers actually perceive the difference between Fine Cup and Good Cup after roasting, grinding, extraction, and the addition of other ingredients?
November 1, 2026
By Gustavo Matias