## Tight Inventories Drive Coffee Market Higher Amid Production Concerns

### Robusta Futures and Arabica Both Posting Gains

Coffee markets are experiencing upward pressure as global supply chains face tightening constraints. Both arabica and robusta futures have recorded gains, with March arabica contracts rising 0.17% and March robusta futures climbing 0.48%. Arabica has reached its highest point in four weeks, reflecting ongoing supply concerns that continue to support price levels across the sector.

The immediate pressure stems from a significant decline in monitored warehouse stocks. Arabica inventory at ICE storage facilities dropped to a 1.75-year low of 398,645 bags in mid-November, while robusta stocks hit a one-year low of 4,012 lots in early December. Though both have since recovered modestly—arabica rebounding to 461,829 bags and robusta climbing to 4,278 lots—the recent lows underscore the constrained nature of available supply.

### Weather Disruptions in Brazil Amplify Price Support

The world's largest arabica supplier is facing weather headwinds that are reinforcing market tightness. Brazil's Minas Gerais region, which dominates global arabica production, received only 47.9 mm of rainfall during the week ending January 2—approximately 33% below its historical average. This drought stress coincides with a strengthening Brazilian real, which recently hit a one-month high against the US dollar, making Brazilian coffee exports comparatively less competitive in international markets.

### Production Forecasts Paint Mixed Picture for 2025/26

Looking ahead, the outlook remains nuanced. Brazil's crop forecasting agency Conab raised its 2025 harvest estimate by 2.4% in December, now projecting 56.54 million bags compared to the prior September forecast of 55.20 million bags. However, the USDA's Foreign Agriculture Service (FAS) projects a 3.1% decline in Brazil's production to 63 million bags for 2025/26, tempering some of the optimism surrounding South American supplies.

Offsetting Brazilian constraints, Vietnam—the world's dominant robusta producer—is expanding output significantly. Coffee exports from Vietnam surged 17.5% year-over-year in 2025, reaching 1.58 million metric tons. Production forecasts for Vietnam's 2025/26 season predict a 6% increase to 1.76 million metric tons (29.4 million bags), potentially the highest in four years. Should weather conditions prove favorable, output could climb as much as 10% above the prior crop year.

### Global Supply Trajectory and Market Implications

On a global scale, the International Coffee Organization (ICO) reported that worldwide coffee exports for the current marketing year declined 0.3% year-over-year, totaling 138.658 million bags. The FAS projects global coffee production for 2025/26 will reach 178.848 million bags, a 2% increase. However, this growth masks divergent trends: arabica output is forecast to drop 4.7% to 95.515 million bags, while robusta production is expected to surge 10.9% to 83.333 million bags.

One key constraint lies ahead: ending stocks for 2025/26 are anticipated to decline 5.4% to 20.148 million bags from the 2024/25 level of 21.307 million bags. This inventory contraction, combined with lingering effects of prior tariff disruptions—US Brazilian coffee imports fell 52% between August and October when tariffs were elevated—continues to limit supply availability and sustain price support across both arabica and robusta futures markets.