Global Coffee Supply Surge Sends Robusta and Arabica into Retreat

Coffee markets face mounting pressure as production forecasts climb and weather patterns favor crop development. Both robusta coffee and arabica varieties have tumbled over the past two weeks, with March arabica settling -2.00% lower and January robusta sliding -2.13%. This pullback reflects a fundamental shift: global coffee supplies are expected to expand significantly through 2025/26, dampening near-term price support.

Supply Outlook Overwhelms Price Support

Brazil’s favorable weather conditions have become a double-edged sword for coffee prices. Heavy rainfall across Minas Gerais—Brazil’s dominant arabica region—reached 155% of historical norms, strengthening crop prospects. Brazil’s crop agency Conab subsequently raised its 2025 coffee output forecast by 2.4% to 56.54 million bags. The USDA’s Foreign Agriculture Service projects world coffee production will reach a record 178.68 million bags in 2025/26, driven by a +7.9% surge in robusta coffee production to 81.658 million bags.

Vietnam, the world’s largest robusta coffee producer, compounds these supply concerns. November exports jumped 39% year-over-year to 88,000 MT, while full-year coffee shipments climbed 14.8% to 1.398 MMT. Looking ahead, Vietnam’s 2025/26 coffee production is forecast to rise 6% year-over-year to 1.76 MMT—potentially a 4-year peak if weather cooperates.

Mixed Signals from Inventory Levels

Storage dynamics present conflicting narratives. ICE arabica inventories have recovered to 426,523 bags but remain well below their long-term trajectory. Robusta coffee warehousing dropped to an 11.5-month low of 4,012 lots, signaling constrained near-term availability. However, forward-looking FAS estimates suggest 2025/26 ending stocks will climb 4.9% year-over-year to 22.819 million bags, which could eventually weigh on prices despite current tightness.

Regional Divergence and Market Mechanics

Brazil’s green coffee exports contracted sharply in November, falling 27% year-over-year to 3.3 million bags. This decline was partly structural—US buyers had reduced Brazilian coffee purchases by 52% during the tariff period. With those levies now eased, the path for renewed US demand remains uncertain given existing domestic inventory constraints.

The International Coffee Organization reported that global coffee exports declined 0.3% year-over-year during the current marketing year, suggesting a slight rebalancing despite robust production pipelines. As robusta coffee supplies expand and arabica production contracts modestly (-1.7% projected), market participants are recalibrating positions ahead of the supply inflection expected in mid-2025.