What Do Coffee Market Signals Tell Us About Price Direction?

Coffee futures delivered mixed signals on Friday as weather forecasts reshaped market sentiment. March arabica coffee settled down 2.80 points (-0.78%), while March ICE robusta declined 3 points (-0.07%), reversing earlier gains as meteorological updates indicated increased precipitation prospects for Brazil’s key producing regions throughout the coming week.

Brazil’s Weather Woes vs. Production Optimism

The weather shift marks a dramatic turn from Thursday’s rally, when arabica hit a one-month peak following reports of below-average rainfall across Brazil. Somar Meteorologia’s latest assessment showed that Minas Gerais—accounting for the bulk of Brazil’s arabica output—recorded just 26.5mm of rain in the week through January 9, representing only 29% of normal levels. Despite these dry conditions, Brazil’s crop forecasting agency Conab raised its 2025 production projection by 2.4% to 56.54 million bags, up from September’s 55.20 million bags forecast.

Inventory Signals Paint a Complex Picture

ICE warehouse data reveals the coffee market’s tug-of-war between supply and demand fundamentals. Arabica inventories fell to a 1.75-year low of 398,645 bags on November 20 but have since recovered to 461,829 bags as of late December. Similarly, robusta stocks dipped to 1-year lows of 4,012 lots in early December before rebounding to 4,278 lots by late month. These coffee market signs suggest that while supply constraints provided initial support, restocking activity has eased some bullish pressures.

Vietnam’s Production Surge Weighs on Robusta

Vietnam’s robust export momentum continues to challenge robusta prices. The country’s 2025 coffee shipments surged 17.5% year-over-year to 1.58 million metric tons, according to National Statistics Office data released Monday. Looking ahead, production is projected to climb 6% to 1.76 million metric tons for 2025/26, potentially reaching 29.4 million bags—a four-year peak. Vietnam’s Coffee and Cocoa Association indicated output could rise as much as 10% if favorable weather persists, underscoring robusta’s ample supply outlook.

Global Production and Demand Dynamics

The International Coffee Organization reported that worldwide coffee exports for the current marketing year (October-September) declined just 0.3% year-over-year to 138.658 million bags, signaling relative stability despite price volatility. However, the USDA’s Foreign Agriculture Service painted a more expansive picture for 2025/26, projecting global production will reach a record 178.848 million bags, up 2.0% year-over-year. This gain masks divergent trends: arabica production is forecast to decline 4.7% to 95.515 million bags while robusta output surges 10.9% to 83.333 million bags.

Brazil’s specific outlook shows production declining 3.1% to 63 million bags, while Vietnam’s coffee output is expected to advance 6.2% to a four-year high of 30.8 million bags. The FAS projects that global coffee ending stocks will contract 5.4% to 20.148 million bags from 2024/25 levels of 21.307 million bags.

What’s Next for Coffee Traders?

These conflicting coffee market signs—tighter global inventories offset by robust supply increases from Vietnam, coupled with weather volatility in Brazil—suggest traders face an uncertain intermediate outlook. While dry conditions in top-producing regions support prices, the prospect of abundant harvests and recovered warehouse stocks may continue to cap rallies.