Weather Concerns Support Arabica While Vietnamese Supply Surge Pressures Robusta Markets

Arabica and robusta coffee futures showed divergent price movements on Monday, with distinct supply-side factors driving market sentiment in opposite directions. March arabica coffee (KCH26) advanced +2.05 points to close +0.57% higher, while March ICE robusta coffee (RMH26) retreated -36 points, settling -0.91% lower and touching a one-week low.

Brazil’s Rainfall Deficit Underpins Arabica Strength

Moisture shortages across Brazil’s primary arabica-growing regions have emerged as a key price support mechanism. According to Somar Meteorologia’s latest assessment, Minas Gerais—Brazil’s largest arabica coffee production hub—recorded only 47.9 mm of precipitation during the week ending January 2, representing just 67% of the long-term rainfall average for this period. Such below-normal moisture patterns raise crop stress concerns and provide fundamental support for arabica prices in the near term.

Currency movements have amplified this positive dynamic for arabica producers. The Brazilian real (^USDBRL) climbed to a three-week peak against the US dollar on Monday, a development that typically dampens export enthusiasm among Brazilian coffee growers and supports local-currency-denominated prices.

Vietnamese Robusta Exports Create Supply Headwinds

Robusta coffee faces mounting pressure from a surge in Vietnamese shipments. Vietnam’s National Statistics Office disclosed that 2025 coffee exports jumped 17.5% year-over-year to 1.58 million metric tons (MMT), easing immediate supply concerns and weighing on robusta valuations.

Looking ahead, Vietnam’s production trajectory remains elevated. The country’s 2025/26 coffee output is projected to reach 1.76 MMT—or 29.4 million bags—marking a four-year high with a +6% year-over-year increase. The Vietnam Coffee and Cocoa Association (Vicofa) signaled in October that the 2025/26 crop could be 10% larger than the prior year if weather patterns cooperate, further reinforcing expectations for ample robusta supplies.

Inventory Dynamics Show Mixed Signals

ICE arabica coffee stocks fell to a 1.75-year low of 398,645 bags on November 20 before recovering to a two-month high of 456,477 bags by December 24. Robusta inventories traced a similar pattern, declining to a one-year low of 4,012 lots on December 10 and recovering to a four-week high of 4,278 lots by late December. While tightening inventory levels typically support prices, the recovery in both contracts suggests equilibrium pressures are easing.

Import Demand Constraints and Production Forecasts

US coffee purchases from Brazil fell sharply during the tariff-affected period from August through October, dropping 52% year-over-year to 983,970 bags. Although those tariffs have subsequently been reduced, American coffee inventories remain constrained, limiting near-term import opportunities.

On the production front, Brazil’s Conab agency elevated its total 2025 coffee production forecast by 2.4% to 56.54 million bags in December, up from a September estimate of 55.20 million bags. However, the USDA’s Foreign Agriculture Service (FAS) projects Brazil’s 2025/26 output will decline 3.1% year-over-year to 63 million bags, reflecting longer-term production uncertainty.

Global coffee production is expected to expand 2.0% in 2025/26 to a record 178.848 million bags, according to FAS. The breakdown reveals a -4.7% decrease in arabica to 95.515 million bags and a +10.9% increase in robusta to 83.333 million bags. FAS anticipates ending stocks will contract 5.4% to 20.148 million bags from 21.307 million bags in 2024/25, providing modest support for prices across both contract grades.

The International Coffee Organization (ICO) reported on November 7 that global coffee exports for the current marketing year (October-September) declined 0.3% year-over-year to 138.658 million bags, suggesting global demand remains stable despite production increases.