Historical Coffee Price Under Pressure: Rain in Brazil and Strong Dollar Halt Recovery

The Breaking Point in Coffee Markets

Arabica coffee futures for March (KCH26) plummeted 3.41% in today’s session, while its robusta counterpart on ICE (RMH26) declined 1.02%. Behind this movement converge three key factors: forecasts of rainfall in Brazil for the coming days, the strength of the US dollar at four-week highs, and a global supply abundance that reshapes market expectations.

Why Is Coffee Dropping Now?

Relief from Brazilian Drought

Last week, Arabica coffee hit four-week highs thanks to drought conditions recorded in Minas Gerais, Brazil’s most important producing region. Meteorological data from Somar indicated only 47.9 mm of rain (67% of the historical average) in the period ending January 2. However, the prospect of imminent rains in central Brazil has reversed the bullish sentiment, easing previous tensions over bean availability.

Vietnam Takes Lead in Robusta Supply

The world’s leading robusta producer reported a 17.5% year-on-year increase in coffee exports for 2025, reaching 1.58 million metric tons. More ambitious projections suggest that the 2025/26 harvest could reach 1.76 million tons (29.4 million bags), a four-year high, especially if weather conditions remain favorable.

Inventory Recovery Weakens Prices

Although ICE-monitored coffee inventories touched historic lows a few weeks ago (398,645 Arabica bags on November 20), the situation has reversed. Arabica stocks recovered to 461,829 bags on Wednesday, while robusta stocks also showed a similar recovery trend over the past five weeks. This replenishment reduces buying urgency in the market.

The Broader Context: Record Supply in Perspective

Bullish Projections for Brazil and Vietnam

Brazil’s Conab agency revised its estimate for the 2025 harvest upward by 2.4%, placing it at 56.54 million bags, while the USDA projects a 6.2% increase in Vietnamese production. These increases paint a relatively abundant scenario that pressures the historic coffee price downward.

Persistent Decline in US Demand

Although previous tariffs on Brazilian coffee have been reduced, their impact was significant: between August and October, US imports from Brazil fell 52% compared to the previous year, totaling just 983,970 bags. The recovery of this demand is hindered by still limited inventories in North America, constraining the potential for purchase reactivation.

Global Production Hits Record Highs

The USDA projects a record global production of 178.848 million bags for 2025/26, representing a 2% annual increase. However, ending stocks would fall 5.4% to 20.148 million bags, a sign that maintains some price support despite abundant supply.

Market Reading: Between Recovery and Containment

The historic coffee price faces a consolidation phase where contradictory signals converge. The expected rainfall in Brazil and the strengthening dollar act as immediate headwinds, while projections of a record global harvest provide a ceiling for any sustained rebound. Speculators should monitor both the meteorological developments in Minas Gerais and the evolution of US demand—two variables that will define the next directional move in the coffee market.