{"id":222178,"date":"2025-10-21T12:07:05","date_gmt":"2025-10-21T19:07:05","guid":{"rendered":"https:\/\/royalcoffee.com\/?p=222178"},"modified":"2025-10-21T12:11:03","modified_gmt":"2025-10-21T19:11:03","slug":"coffee-market-update-backwardation-and-what-it-means-for-roasters","status":"publish","type":"post","link":"https:\/\/royalcoffee.com\/coffee-market-update-backwardation-and-what-it-means-for-roasters\/","title":{"rendered":"Coffee Market Update: Backwardation and What It Means for Roasters"},"content":{"rendered":"

The coffee market has entered rare territory. For the past two years, the C-market has remained in backwardation, an inversion where nearby contracts trade at a premium to future months. That inversion has deepened sharply in recent weeks. The spread between December 2025 and March 2026 is now more than 20 cents per pound, and the December\u2013July difference is close to 50 cents.<\/span>\u00a0<\/span><\/p>\n

Below is the current ICE (Intercontinental Exchange) Coffee (KC) calendar spread, showing how the near-term premium has surged:<\/span><\/p>\n

\"\u00a0ICE

ICE Coffee (KC) Calendar Spread \u2014 Weekly Continuation. Source: CQG Inc., October 2025<\/p><\/div>\n

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  1. Near-Term Prices Surge on Brazil and Colombia Tensions<\/strong><\/li>\n<\/ol>\n

    The week began with further gains. On Monday, the December contract in New York climbed 990 points, or 2.5%, to 407.35\u00a2 per pound. In London, the January Robusta contract rose $38 per metric ton, or 0.85%, to $4,516 per ton.<\/span>\u00a0<\/span>These movements are being driven by two overlapping issues: weather stress in Brazil<\/a> and worsening diplomatic tensions between the United States and Colombia.<\/span>\u00a0<\/span><\/p>\n

    \u00a0<\/span>The<\/span>\u00a0<\/span>U<\/span>.<\/span>S<\/span>.<\/span> president recently issued sharp public criticism of Colombian president Gustavo Petro <\/a>and raised the possibility of imposing tariffs on Colombian coffee. The threat has unsettled the U.S. market, which relies heavily on Colombia as a key supplier. In 2024, Brazil accounted for 35% of U.S. coffee imports, while Colombia supplied 20%. Any trade restriction on Colombia would tighten the U.S. supply chain even further and add upward pressure to New York prices.<\/span>\u00a0<\/span><\/p>\n

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    1. Spot Inventories Remain Critically Low<\/strong><\/li>\n<\/ol>\n

      ICE-monitored arabica inventories have fallen to around 495,000 bags, the lowest in over a year. Robusta inventories hover near 6,200 lots. These are historically tight levels that magnify the market\u2019s sensitivity to any new supply risk. When certified stocks fall this far, the value of physical coffee increases. Traders refer to this as the \u201cconvenience yield,\u201d but in practical terms it means roasters must pay a premium for immediate delivery.<\/span>\u00a0<\/span><\/p>\n

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      1. Tariffs and Policy Uncertainty Distort Trade Flows<\/strong><\/li>\n<\/ol>\n

        The existing 50% tariff on Brazilian green coffee<\/a> imports continues to disrupt U.S. trade flows. American importers have canceled or deferred contracts, forcing exporters in Brazil to redirect shipments to other destinations. The result is a structural shortage in the U.S., even as global output remains adequate.<\/span>\u00a0<\/span><\/p>\n

        Now, the potential for Colombian tariffs adds a second front of risk. Together, these developments threaten to squeeze supply from both major U.S. origins simultaneously. Until policy stabilizes or tariffs are lifted, it\u2019s difficult to envision a meaningful rebuild of U.S. inventories.<\/span>\u00a0<\/span><\/p>\n

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        1. A Market That Can\u2019t Normalize<\/strong><\/li>\n<\/ol>\n

          To restore balance, two conditions must occur:<\/span>\u00a0<\/span><\/p>\n