Mixed Signals in Coffee Markets: Why Arabica's Rally Might Not Last

Arabica coffee had a solid Thursday, closing up 1.05% to settle at higher levels, while robusta coffee stumbled with a 0.26% decline. The divergence tells an interesting story about supply dynamics that are currently reshaping global coffee markets.

Brazil’s Export Crunch Is Giving Arabica a Lifeline

Here’s what caught traders’ attention: Brazil’s November green coffee exports nosedived 27% year-over-year, falling to just 3.3 million bags. That’s a significant drop, and it immediately put a floor under arabica prices. The supply squeeze is real—Brazil’s Minas Gerais region, which produces most of the country’s arabica, received only 11mm of rain last week, a mere 17% of the historical average. When the world’s largest producer can’t ship, prices tend to find support.

But before you get too bullish on arabica, there’s a complication brewing. Conab, Brazil’s crop forecasting agency, just raised its 2025 production estimate by 2.4% to 56.54 million bags. Production is actually tracking higher than expected, which creates a medium-term overhang on prices.

Vietnam’s Robusta Boom Is a Different Beast

Vietnam painted the opposite picture. November coffee exports surged 39% year-over-year to 88,000 MT, with year-to-date shipments up 14.8%. This is why robusta is under pressure—Vietnam, the world’s largest robusta producer, is flooding markets with supply. For 2025/26, Vietnam’s output is projected to jump 6.9% to 31 million bags, a 4-year high.

The Global Inventory Picture Is Tightening

ICE-monitored arabica inventories are at levels we haven’t seen in nearly two years. They hit a 1.75-year low of 398,645 bags in mid-November, though they’ve recovered slightly. Robusta stockpiles are even tighter, hitting 11.5-month lows. For a commodity market, that’s the kind of structure that supports prices, especially when supply surprises hit.

The Tariff Factor and US Demand

Here’s a wildcard: American coffee imports from Brazil tanked 52% from August-October compared to last year, dropping to 983,970 bags during Trump’s tariff period. Those tariffs are now off the table, but US coffee inventories remain lean. If US buyers return to the market, demand could surprise to the upside.

The Regulatory Wildcard

The European Parliament threw traders a curveball in November by delaying EUDR (the deforestation regulation) by a year. That means coffee will keep flowing from regions where deforestation is occurring, which is bearish for prices long-term. The one-year reprieve keeps African, Indonesian, and South American coffee moving to EU markets without friction.

What It Means for Coffee Going Forward

Global coffee exports for October-September are barely holding—down just 0.3% year-over-year at 138.658 million bags. The USDA projects 2025/26 production at 178.68 million bags, up 2.5%, but that masks the divergence: arabica production is expected to drop 1.7% while robusta supplies surge 7.9%.

Arabica’s Thursday rally reflects genuine supply tightness in Brazil, but that strength will be tested as 2025 unfolds. The real action is in robusta, where Vietnamese supplies are reshaping the entire market structure. Coffee traders need to watch three things closely: Brazilian rainfall patterns in coming weeks, Vietnam’s export pace, and whether US buyers return to Brazilian coffee now that tariffs are cleared.