Robusta Coffee London Market Faces Headwinds as Supply Forecasts Surge and Dollar Strengthens

Global Production Boom Pressures Commodity Valuations

The outlook for global coffee production paints a picture of abundance rather than scarcity. According to the USDA’s Foreign Agriculture Service bi-annual report released in December, worldwide coffee output for 2025/26 is anticipated to hit a record 178.848 million bags—a 2% increase year-over-year. Within this expansion, robusta coffee production is set to climb 10.9% to 83.333 million bags, while arabica output is expected to contract by 4.7% to 95.515 million bags. This supply surge, particularly in the robusta segment, is creating significant headwinds for traders monitoring the London market and beyond.

Vietnam’s expanded cultivation further compounds the bearish narrative. The country’s coffee production for 2025/26 is projected to jump 6.2% to 30.8 million bags, marking a four-year peak. More immediately, Vietnam’s exports for 2025 have already climbed 17.5% year-over-year to 1.58 million metric tons according to the National Statistics Office. The Vietnam Coffee and Cocoa Association forecasts an even starker scenario: if weather remains favorable, the 2025/26 crop could potentially swell 10% above the previous cycle. As the world’s dominant robusta coffee producer, Vietnam’s productivity surge directly impacts London market dynamics and global commodity pricing.

Rainfall Relief Collides with Currency Headwinds

March arabica coffee futures contracts (KCH26) retreated 3.41% during recent trading, while March robusta coffee (RMH26) slipped 1.02%. The pullback reflects a complex interplay of supply and demand factors. Brazilian rainfall forecasts for the coming week have significantly eased drought concerns that previously supported prices, with meteorological data showing Minas Gerais—Brazil’s primary arabica belt—received only 67% of normal precipitation in early January at 47.9 mm.

Yet price pressure extends beyond weather patterns. The U.S. dollar’s surge to four-week highs has systematically weighed on commodity valuations globally, including coffee futures. Additionally, U.S. importers have constrained Brazilian coffee purchases, with shipments falling 52% year-over-year between August and October when tariffs were in effect, totaling just 983,970 bags. Although tariff rates have moderated since, American coffee inventories remain depleted, limiting near-term demand recovery.

Supply Forecasts vs. Inventory Dynamics

Brazil’s crop forecasting agency, Conab, raised its 2025 harvest estimate by 2.4% to 56.54 million bags in December, suggesting robust production ahead. Paradoxically, this abundance is underpinning the current downtrend, as traders price in elevated future supplies.

ICE inventory levels tell a mixed story. Arabica stocks dipped to a 1.75-year low of 398,645 bags in November before recovering to 461,829 bags by Wednesday. Robusta inventories similarly fell to one-year lows in December but have since bounced to five-week highs. While tighter near-term stockpiles provide minor support, the International Coffee Organization noted global exports declined marginally by 0.3% year-over-year to 138.658 million bags, signaling constrained demand relative to supply potential.

Forward Outlook and Market Implications

The USDA projects global ending stocks for 2025/26 will contract 5.4% to 20.148 million bags—a tighter reserve than the prior year’s 21.307 million bags. Yet this modest decline sits against a backdrop of record production capacity, suggesting structural imbalances may persist. For robusta coffee traders monitoring the London market, Vietnam’s production velocity combined with Brazil’s healthy arabica prospects signals sustained pricing pressure unless demand accelerates significantly or weather-related disruptions emerge.