Market Update and Origin Outlook

In recent weeks, the coffee market has experienced renewed volatility following the correction in the C market. Across origins, this movement has triggered a cautious response among producers, cooperatives, and exporters.

Below is a summary of the current market dynamics observed at origin, along with our latest operational insights from Honduras, Colombia, and Peru.

Market context at origin

The recent decline in the C market has created concern across the supply chain. Despite the correction, many market participants continue to expect a potential recovery in the short to medium term.

In response, a significant portion of producers, cooperatives, and intermediaries are currently holding inventories rather than selling at current market levels. Much of the coffee was originally purchased or produced when price expectations were higher, making it difficult for sellers to accept current physical market prices.

This situation has slowed local market activity and reduced liquidity, particularly for smaller and mid sized exporters. For many operators, replenishing inventory for contracts at current prices would imply selling at a loss.

Rather than aggressive speculation, the prevailing sentiment in the physical market is one of caution. Sellers are limiting exposure while waiting for clearer price signals. At the same time, price expectations between producers and exporters remain significantly misaligned, which continues to slow transactional activity.

Honduras

Harvest progress and market behavior

The Honduran harvest has already passed its peak months. Collection is now concentrated mainly in mid altitude and high-altitude regions, while harvest activity in lower altitude areas has largely concluded.

Volumes entered the market progressively throughout the season, with a steady increase during December and a peak in January and February. Current availability reflects the later stages of harvest, with more moderate flows coming from higher elevations.

Market behavior among exporters and producers is currently divided. Exporters who were able to secure forward sales at favorable levels remain active buyers. Others without fixed positions are operating more cautiously, as current replacement costs exceed their projected margins.

Producers and market participants are responding in different ways. Some prefer to fix prices now to limit potential losses. Others are waiting for a market recovery before committing to new sales.

This environment has begun to affect logistics and contract execution. Delays in shipments have been observed due to limited availability of coffee at viable price levels. Lower sales volumes are also reducing local cash flow, which in turn affects purchasing capacity within the supply chain. Looking ahead, securing the necessary inventory to fulfill existing contracts will be essential by April. At this stage, quality levels remain consistent with seasonal expectations.

Buyers should remain aware of a key risk in the market: contracts fixed at low price levels may become difficult to execute if replacement costs remain elevated.

Colombia

Reduced supply and cautious market activity

In Colombia, the recent C market correction has reinforced a cautious stance among producers and exporters. Many producers remain relatively well capitalized and are therefore able to delay sales while waiting for improved price conditions. As a result, inventory retention is particularly visible for remaining volumes from the 2025 harvest. This dynamic has significantly slowed the local physical market. Transaction volumes are lower and liquidity has tightened, with producers generally selling only when necessary.

At the same time, exporters are adjusting their strategies to manage risk. Rather than building large inventory positions, many are focusing on coffees that have already been sold or on contracts with established differentials. Production conditions are also contributing to a tighter supply outlook. Field observations suggest a noticeable reduction in production during the first half of the year compared with 2024 and late 2025 levels.

Several factors are contributing to this decline. Excess rainfall has affected flowering, maturation, and bean development in multiple regions, particularly in southern producing areas where reduced solar radiation has been reported. The production cycle is also adjusting following previous high yield years. In addition, economic pressure has limited timely investments in fertilization and agronomic management.

Currency dynamics are also affecting producer margins. The Colombian peso appreciated significantly at the beginning of 2026, falling below COP 3,700 to 3,800 per dollar. Compared with early 2025 levels near COP 4,409 per dollar, the peso has strengthened by roughly 17 percent.

For producers, this appreciation translates into an estimated loss of COP 500,000 to 550,000 per 125 kg carga purely due to exchange rate effects. This has added additional pressure to farm level profitability and has been publicly noted by the leadership of the National Federation of Coffee Growers.

Taken together, these factors are contributing to a selective physical market where quality, traceability, and certification play an increasingly important role in buyer competition.

Peru

Early indicators for the upcoming harvest

In Peru, preparations for the upcoming harvest are progressing across producing regions. Current flowering patterns are somewhat variable due to rainfall and humidity conditions. While precipitation supports fruit maturation, excessive rainfall may increase pest pressure and affect quality, particularly in higher altitude zones where production volumes could decline slightly. In contrast, mid altitude and lower altitude regions are benefiting from current rainfall patterns, which may help offset potential reductions in higher elevations.

Most farms have already completed key agronomic activities such as weeding and fertilization. Coffee trees are currently in the grain filling stage and moving toward maturation.

Labor availability remains stable, although wage costs continue to be elevated relative to the recent decline in international prices.

At this stage, early indicators suggest a harvest that is broadly in line with initial expectations, though yields may be slightly lower than last year. Since October, some producers have also invested in renovation and the establishment of new planting areas, which may temporarily reduce short term volumes but support medium term stability.

From a market perspective, the more moderate global price environment has slowed early negotiations. Cooperatives are adopting a cautious approach and monitoring market conditions before committing significant volumes.

Producer sentiment remains attentive to price developments. While no drastic changes in farm level decisions are being observed, further price declines could lead to increased caution within the market.

For now, commercialization is expected to follow normal seasonal cycles. Strategic decisions regarding inventory management typically occur later in the season, particularly between June and July when harvest volumes provide greater market clarity.

More precise projections regarding volume and quality are expected from May onward, with more consolidated estimates likely between June and July as harvest progress becomes clearer.

Looking ahead

Across all three origins, the physical market is currently characterized by caution, slower liquidity, and a wait and see approach among producers and exporters.

At the same time, structural factors such as weather patterns, currency movements, and cost pressures continue to shape supply dynamics.

As always, our team remains closely connected with partners at origin and will continue sharing updates as the season evolves.

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