Global Coffee Supply Surge Triggers Market Correction—Robusta Leads Decline Amid Production Boom

Price Pullback Signals Shift in Coffee Market Dynamics

The international coffee market experienced a notable downturn recently, with March arabica futures contracts declining 3.41%, while March robusta coffee contracts on the London ICE market fell 1.02%. These declines reflect a confluence of factors reshaping commodity sentiment: anticipated rainfall in Brazil’s coffee belt has alleviated drought concerns, while a strengthened U.S. dollar exerts persistent downward pressure on all commodities.

Why Robusta Coffee London Market Is Facing Headwinds

Vietnam’s robust export momentum is the primary headwind for robusta coffee on the London market. The world’s dominant robusta producer reported a remarkable 17.5% year-over-year surge in coffee exports during 2025, reaching 1.58 million metric tons—a volume that underscores the region’s expanding agricultural capacity. This supply influx directly weighs on robusta coffee pricing across international exchanges, including the London ICE market where most global robusta transactions settle.

Arabica Recovery and Brazil’s Weather Narrative

The arabica sector tells a different story. A week prior to this decline, arabica prices had climbed to a four-week peak, driven by rainfall deficits across Brazil’s primary growing regions. Meteorological data from Somar showed that Minas Gerais—the heart of Brazil’s arabica production—received merely 47.9 mm of precipitation in early January, representing just 67% of historical norms. However, forecasts now promise substantial rainfall across central Brazil, reversing the prior drought narrative and deflating price momentum.

Inventory Dynamics: Temporary Stabilization

Both arabica and robusta coffee showed inventory stabilization in recent weeks. Arabica stocks tracked by the ICE exchange bottomed at 398,645 bags in November before recovering to 461,829 bags by mid-week. Similarly, robusta inventories, which had hit one-year lows in December, rebounded to five-week highs. This inventory rebound, while modest, provides subtle support—though not enough to offset broader supply concerns.

U.S. Import Collapse Shapes Market Structure

Tariff-driven disruptions continue affecting market structure. During the period when tariffs on Brazilian coffee imports remained elevated (August through October), U.S. coffee shipments plummeted 52% year-over-year to 983,970 bags. Though tariffs have since been reduced, U.S. coffee inventories remain constrained, limiting the region’s ability to absorb global supply increases.

Production Forecasts Point to Historic Output Levels

Supply expansion represents the most significant downside pressure. Brazil’s crop forecasting authority, Conab, raised its 2025 harvest estimate to 56.54 million bags—a 2.4% upward revision from September projections. Meanwhile, Vietnam’s output is anticipated to reach 1.76 million metric tons (29.4 million bags) for 2025/26, marking a four-year high and reflecting a 6% year-over-year increase. The Vietnam Coffee and Cocoa Association suggests the current season could push 10% higher if weather remains favorable.

Global Coffee Supply Outlook and Market Implications

The USDA’s Foreign Agriculture Service (FAS) released projections indicating global coffee production for 2025/26 will achieve a record 178.848 million bags—a 2% increase year-over-year. This aggregate masks divergent trends: arabica output is forecast to contract 4.7% to 95.515 million bags, while robusta production surges 10.9% to 83.333 million bags. Brazil’s harvest is projected to decline 3.1% to 63 million bags, whereas Vietnam is anticipated to reach 30.8 million bags—a four-year peak reflecting strengthened robusta coffee output.

Ending stocks for 2025/26 are projected to decline 5.4% to 20.148 million bags from the prior year’s 21.307 million bags—a modest tightening that fails to offset the production exuberance. The International Coffee Organization (ICO) reported that global exports for the current marketing year (October-September) declined just 0.3% year-over-year to 138.658 million bags, suggesting demand remains resilient despite the challenging price environment on robusta coffee and London markets alike.