Coffee Market Pressured by Prospects of Adequate Global Supplies

Coffee futures declined sharply on Friday as market participants reassess the outlook for ample supplies across major growing regions. March arabica coffee closed down 6.90 points (-1.83%), while January robusta contracts lost 84 points (-2.00%), with robusta prices hitting a 2.5-month low. The combination of rising production forecasts and expanding export volumes continues to challenge price stability.

Supply Surge Weighs on Prices

The bearish pressure stems primarily from upward revisions to major production estimates. Brazil’s crop forecasting agency Conab increased its 2025 coffee production forecast by 2.4% to 56.54 million bags, up from September’s 55.20 million bags. Looking ahead, the USDA’s Foreign Agriculture Service projects that Brazil’s 2025/26 output will reach 65 million bags, representing a modest 0.5% year-over-year increase.

Vietnam, the world’s largest robusta producer, presents an even more aggressive supply picture. The country’s coffee exports surged in November, with shipments climbing 39% year-over-year to 88,000 MT. For the January-November period, cumulative exports rose 14.8% year-over-year to 1.398 million MT. Looking to 2025/26, production is projected to climb 6% to 1.76 million MT (29.4 million bags), a 4-year high. The Vietnam Coffee and Cocoa Association indicated in October that if weather remains favorable, output could rise an additional 10% compared to the previous crop year.

At the global level, the USDA forecasts world coffee production in 2025/26 will increase 2.5% to a record 178.68 million bags. Robusta production is expected to surge 7.9% to 81.658 million bags, while arabica production faces a headwind with an anticipated 1.7% decline to 97.022 million bags.

Regulatory Shifts and Trade Dynamics

A significant bullish setback emerged from European policy developments. On November 26, the European Parliament approved a one-year delay to the EU Deforestation Regulation (EUDR), which targets deforestation in key commodity-producing regions including coffee-growing areas in Africa, Indonesia, and South America. The postponement will allow continued agricultural imports from regions experiencing deforestation, potentially unlocking additional supply flows into European markets.

Trade dynamics also reflect ample supply considerations. Brazil’s green coffee exports contracted 27% year-over-year in November to 3.3 million bags, providing modest support. However, US import patterns tell a different story—American purchases of Brazilian coffee during the period when tariffs were in effect (August through October) fell 52% to 983,970 bags, though tariff relief has since eased some supply constraints.

Mixed Signals from Physical Markets

Inventory dynamics present a complex picture. ICE-monitored arabica stocks fell to a 1.75-year low of 398,645 bags on November 20 before recovering to 426,523 bags last Friday. Robusta inventories hit an 11.5-month low of 4,012 lots on Wednesday, indicating some physical tightness despite ample production expectations.

Global export data from the International Coffee Organization shows relatively subdued activity, with October-September marketing year exports declining 0.3% year-over-year to 138.658 million bags—suggesting current demand may not absorb the anticipated supply increases.

Weather and Forward Outlook

Brazil’s arabica-growing regions are experiencing moisture stress. Minas Gerais, the largest arabica-growing state, received only 11 mm of rain during the week ended December 5, representing just 17% of historical averages. This precipitation deficit provides some price support, though it has been insufficient to offset broader supply-side pressures.

Looking ahead, the USDA projects 2025/26 ending stocks will rise 4.9% to 22.819 million bags from 21.752 million bags in 2024/25, signaling that despite near-term support factors, the market is ultimately trending toward more ample inventory conditions. The interplay between constrained near-term supplies and expanding medium-term production estimates will likely continue defining price direction.