Coffee Market Caught Between Price Weakness and Supply Surprises

Coffee futures are experiencing mounting pressure from an unexpectedly robust supply picture that’s reshaping market expectations. March arabica coffee fell 0.05 points (-0.01%), while January robusta coffee dropped 14 points (-0.37%), as both contracts hit their lowest levels in four months. A brief dollar weakness provided some relief to the market, though the underlying fundamentals remain decidedly bearish for coffee prices.

Brazil’s Rainfall Easing Production Concerns

The primary culprit behind coffee price weakness is an improving weather situation in Brazil, the world’s largest coffee supplier. Heavy rainfall across coffee-growing regions is no longer a concern—in fact, it’s become a source of relief. Brazil’s Minas Gerais state, which produces the majority of the nation’s arabica crop, received 79.8mm of rain in the week ending December 12, representing 155% of the historical average. Meteorologists are forecasting intense and persistent rains to continue this week, essentially resolving previous drought worries.

This benign outlook for Brazil’s crop explains why coffee prices have sold off sharply in recent weeks. Brazil’s crop forecasting agency Conab revised its 2025 production estimate upward by 2.4%, now projecting 56.54 million bags compared to September’s forecast of 55.20 million bags. Such upgrades typically weigh heavily on commodity prices.

The Robusta Story: Vietnam’s Abundance

Robusta coffee, produced primarily in Vietnam, faces separate supply headwinds. Vietnam’s November coffee exports surged 39% year-over-year to 88,000 metric tons, while cumulative exports through November jumped 14.8% to 1.398 million metric tons. Looking ahead, Vietnam’s 2025/26 coffee production is projected to reach 1.76 million metric tons (29.4 million bags), marking a 4-year high and representing 6% growth compared to the previous year.

Vietnam’s coffee association indicated that production could be even stronger—potentially 10% higher than the prior crop year—if weather remains favorable. This abundance of robusta supply continues to suppress coffee prices despite tighter inventory levels elsewhere.

Mixed Signals on Global Supplies

While regional supplies appear ample, some global metrics suggest tighter conditions. Arabica exporters reported that Brazil’s green coffee shipments fell 27% year-over-year to 3.3 million bags in November, providing some price support. Additionally, ICE-monitored arabica inventories descended to a 1.75-year low of 398,645 bags on November 20, though they rebounded to 426,938 bags by Wednesday. Robusta inventories similarly hit an 11.5-month low of 4,012 lots.

The International Coffee Organization reported that global coffee exports for the current marketing year (October-September) declined 0.3% year-over-year to 138.658 million bags, signaling that despite production increases, export momentum has slowed.

The Tariff Factor and US Demand

US coffee demand tells an interesting story. American buyers had largely avoided Brazilian coffee during the period when Trump administration tariffs were in effect (August through October), with purchases dropping 52% year-over-year to 983,970 bags. Though those tariffs have since been eased, US coffee inventories remain notably tight, potentially supporting future price recovery if demand rebounds.

Forward Production Forecasts Keep Pressure On

The US Department of Agriculture’s Foreign Agriculture Service projects that 2025/26 global coffee production will reach 178.68 million bags, a record high representing 2.5% growth year-over-year. Arabica production is expected to decline 1.7% to 97.022 million bags, but robusta production will surge 7.9% to 81.658 million bags.

Brazil’s output should grow 0.5% to 65 million bags, while Vietnam’s production will jump 6.9% to 31 million bags. Most critically, ending stocks for 2025/26 are forecast to increase 4.9% to 22.819 million bags from 21.752 million bags in the prior year—a development that continues to weigh on coffee prices as market participants absorb the reality of abundant global supplies ahead.

The weaker Brazilian real, which hit a 4.5-month low against the dollar today, further pressures coffee prices by incentivizing Brazilian producers to boost export sales, adding to the supply glut.