Global Coffee Markets Under Pressure as Brazil's Weather Outlook Softens Commodity Demand

Arabica Coffee Futures Face Headwinds from Multiple Fronts

March arabica coffee futures (KCH26) tumbled by 3.41% in recent trading, with robusta contracts (RMH26) declining by 1.02%. The selloff reflects a confluence of bearish factors: incoming precipitation across Brazil’s central regions is easing drought concerns that had previously supported prices, while the U.S. dollar’s four-week peak is adding downward momentum to commodity valuations.

Supply Expectations Overwhelm Near-Term Optimism

The near-term price weakness masks deeper structural shifts in global coffee availability. Brazil’s Conab agency revised its 2025 harvest forecast upward by 2.4%, projecting 56.54 million bags versus the prior September estimate of 55.20 million bags. Simultaneously, Vietnam—responsible for the vast majority of global robusta output—is poised for significant production expansion. Coffee exports from Vietnam climbed 17.5% year-over-year through 2025, hitting 1.58 million metric tons, with forecasts suggesting 2025/26 output could reach 30.8 million bags (1.76 million metric tons), potentially 10% higher than the prior season if weather cooperates.

Inventory Dynamics Offer Temporary Support

ICE warehouse stocks present a mixed picture. Arabica inventory levels fell to a 1.75-year trough of 398,645 bags in November, though they’ve since bounced to 461,829 bags by mid-week. Robusta stocks similarly touched one-year lows in December before recovering to five-week highs. These modest inventory rebounds are restraining the pace of price declines but lack the magnitude to reverse the broader bearish trajectory.

Tariffs Reshape U.S. Import Patterns

U.S. coffee buyers significantly reduced Brazilian purchases during the tariff period (August-October), with imports plummeting 52% year-over-year to 983,970 bags. While tariff rates have subsequently moderated, American inventories remain constrained, limiting near-term demand support for arabica coffee futures.

The Bigger Picture: Record Production Ahead

The USDA’s Foreign Agricultural Service (FAS) forecasts record global coffee production for 2025/26 at 178.848 million bags, up 2% annually. This masks divergent trends: arabica output is projected to fall 4.7% to 95.515 million bags, while robusta surges 10.9% to 83.333 million bags. Brazil’s harvest is expected to decline 3.1% to 63 million bags, but Vietnam’s estimated 6.2% climb to 30.8 million bags will more than offset this contraction. Ending stocks for 2025/26 are predicted to compress 5.4% to 20.148 million bags, suggesting tightening conditions despite record production levels.