Global Coffee Supply Dynamics Shake Market as Brazilian Output Takes Center Stage

Coffee futures displayed divergent signals on Monday, with March arabica coffee ([KCH26]( declining -1.60 points (-0.45%), while March ICE robusta coffee ([RMH26]( advanced +14 points (+0.36%). The mixed performance reflects underlying tensions between tightening inventories and expanding supply projections for Brazilian coffee and competing origins.

Inventory Tightening Supports Price Floor

The inventory situation presents a nuanced backdrop for coffee trading. ICE-monitored arabica stockpiles contracted to a 1.75-year low of 398,645 bags in mid-November before rebounding to 461,829 bags by last Wednesday. Robusta inventories similarly bottomed at a 1-year low of 4,012 lots in early December, subsequently climbing to 4,278 lots by late December. Despite these recoveries, the overall tightness in monitored reserves provides underlying support, though the bounce-back suggests some relief in immediate supply pressures.

Brazilian Coffee Supply Outlook Weighs Heavily

Brazilian coffee production projections have shifted upward, with Conab raising its 2025 estimate by 2.4% to 56.54 million bags in December. However, the USDA’s Foreign Agriculture Service projects a declining trajectory, forecasting Brazil’s 2025/26 output will retreat -3.1% year-over-year to 63 million bags. This divergence creates uncertainty for buyers of Brazilian coffee, particularly given recent shifts in US import dynamics. American coffee purchases from Brazil plummeted 52% during the tariff-impacted August-October period, falling to 983,970 bags compared to the prior year. Though tariffs have since been reduced, rebuilding of US coffee inventories remains incomplete.

Weather and Regional Production Paint Complex Picture

Rain forecasts over central Brazil this week provided relief from dryness concerns that had pressured arabica to 1-month highs last Thursday. Minas Gerais, Brazil’s premier arabica-growing region, received only 26.5 mm of rain during the week ended January 9—just 29% of historical averages. Meanwhile, currency weakness in the dollar ([DXY00]( sparked short-covering rallies in robusta futures, offsetting some arabica losses.

Vietnam’s Surging Output Reshapes Robusta Dynamics

Vietnamese coffee output continues climbing, with 2025 exports surging +17.5% year-over-year to 1.58 million metric tons according to the National Statistics Office. Production forecasts project Vietnam’s 2025/26 coffee output rising +6% to 1.76 MMT (29.4 million bags)—a 4-year high. The Vietnam Coffee and Cocoa Association indicated potential for a 10% increase above the prior crop if weather remains favorable. This expanding robusta supply has bearish implications even as global coffee exports edged -0.3% lower year-over-year to 138.658 million bags in the current marketing year.

Divergent Global Projections

The USDA’s December forecast projects world coffee production climbing +2.0% to a record 178.848 million bags for 2025/26, but with notable internal shifts: arabica declining -4.7% to 95.515 million bags against robusta expanding +10.9% to 83.333 million bags. Global ending stocks face pressure, with projections indicating a -5.4% contraction to 20.148 million bags from 21.307 million in the prior year. These structural changes underscore the broader supply-demand rebalancing unfolding across coffee markets.