## International Coffee Price Turbulence: Weather and Supply Imbalances Signal Market Shift

The international coffee price landscape is experiencing significant volatility, with March arabica futures (KCH26) declining 3.41% and robusta contracts (RMH26) falling 1.02% as multiple market forces converge. While a strengthening U.S. dollar—reaching four-week highs—continues to pressure commodity values, the more immediate driver stems from unexpected rainfall forecasts across central Brazil, temporarily easing concerns about drought conditions in the world's largest arabica-producing region.

### Weather Reversals and Currency Headwinds Reshape Market Sentiment

Recent meteorological developments have substantially altered market dynamics. Rainfall predictions for Brazil's coffee belt next week have considerably weakened the bullish narrative that dominated last Thursday, when arabica prices hit four-week highs amid reports of below-average precipitation in Minas Gerais. The region had received just 47.9 mm of rain in the week ending January 2—a mere 67% of historical norms—but the shifting forecast has promptly reversed that positive bias.

The U.S. dollar's surge to its strongest position in four weeks compounds downward pressures across commodity markets. This currency strength makes coffee and other commodities less attractive for foreign buyers, creating additional headwinds for prices already contending with supply expansion concerns.

### Vietnam's Export Boom Intensifies Robusta Weakness

Vietnam, the world's dominant robusta producer, has substantially accelerated its export activity. The National Statistics Office reported that 2025 coffee exports have surged 17.5% year-over-year to 1.58 million metric tons—a development directly weighing on robusta contract values this week. More significantly, Vietnam's 2025/26 output is projected to climb 6.2% to 30.8 million bags according to the USDA's Foreign Agriculture Service, marking a four-year production zenith.

Such expansion contrasts sharply with arabica-producing regions. While Brazil's Conab agency raised its 2025 harvest estimate by 2.4% to 56.54 million bags in December, the USDA forecasts Brazil's 2025/26 output will actually decline 3.1% to 63 million bags—signaling a potential tightening in arabica supply despite near-term price headwinds.

### Inventory Dynamics and Tariff Aftereffects Complicate the Picture

ICE inventory data presents a mixed technical picture. Arabica stocks rebounded to a 2.5-month high of 461,829 bags by Wednesday, up from November's 1.75-year low, while robusta inventories similarly recovered to five-week highs after December lows. These inventory buildups suggest near-term supply breathing room, though the magnitude of Vietnam's expansion threatens longer-term equilibrium.

U.S. market dynamics remain constrained by tariff legacies. Brazilian coffee imports to the United States plummeted 52% from August through October compared to year-prior levels, totaling just 983,970 bags during the tariff period. Despite recent tariff reductions, U.S. coffee inventories remain compressed, limiting near-term demand recovery.

### Global Production Surge Tempers Price Support

The International Coffee Organization (ICO) reported that worldwide coffee exports for the current marketing year (October to September) declined 0.3% year-over-year to 138.658 million bags. However, the USDA's December report projects starkly different longer-term dynamics: global coffee production for 2025/26 is expected to reach a record 178.848 million bags—a 2% increase year-over-year.

This production growth is heavily skewed toward robusta, which is forecast to climb 10.9% to 83.333 million bags, while arabica output contracts 4.7% to 95.515 million bags. Ending stocks for the 2025/26 season are anticipated to fall 5.4% to 20.148 million bags—a decline that may eventually support prices once supply expansion saturates the market.

The international coffee price volatility underscores an unfolding supply-demand recalibration, where near-term weather reversals and currency moves intersect with structural shifts in regional production capacity.