Vietnam Robusta Surge and Brazil Weather Reshape Global Coffee Market Dynamics

The global coffee market is experiencing significant shifts driven by competing supply narratives and currency movements. Arabica coffee futures for March delivery gained +0.15 points (up 0.04%), while January robusta contracts declined -15 points (-0.34%), reflecting divergent fundamental pressures on the two main coffee varieties.

Currency Tailwinds Support Arabica but Mask Deeper Market Tensions

Arabica coffee found support from strength in the Brazilian real, which hit a 2-week peak against the dollar. This currency appreciation discourages Brazilian producers from exporting, as their local currency earnings become more valuable. However, this near-term support masks concerns about the region’s declining rainfall patterns, with Minas Gerais—Brazil’s largest coffee-growing region—receiving only 20.4 mm of rain during the week ending November 28, approximately 39% of historical norms.

Robusta Under Siege as Vietnam Signals Production Acceleration

Robusta coffee faces mounting pressure from multiple directions. The Vietnam Coffee and Cocoa Association reported that the country’s harvest is 10% complete, with forecasts for drier weather expected to accelerate production this month. Vietnam’s dominance as the world’s largest robusta producer makes these supply signals particularly influential. Recent data shows Vietnam’s coffee exports for January-October 2025 climbed 13.4% year-over-year to 1.31 million metric tons, while 2025/26 production is projected to rise 6% year-over-year to 1.76 million metric tons (29.4 million bags)—a 4-year high.

Inventory Tightening Provides Temporary Price Floor

Despite these bearish supply narratives, shrinking warehouse inventories are creating a pricing floor. ICE arabica inventories fell to a 1.75-year low of 398,645 bags on November 20, while robusta stocks dropped to an 11-month low of 4,115 lots today. These declines stem partly from U.S. tariff policies: American purchases of Brazilian coffee from August through October fell 52% year-over-year to 983,970 bags, as buyers avoided new contracts due to tariffs on imports. Since approximately one-third of America’s unroasted coffee originates from Brazil, this represents a significant market disruption.

Global Supply Story Turns Bullish on Record Production Forecasts

The longer-term outlook suggests coffee prices will face headwinds from anticipated production increases. StoneX forecast on November 19 that Brazil will produce 70.7 million bags in the 2026/27 marketing year, including 47.2 million bags of arabica coffee—a 29% year-over-year increase. The USDA’s Foreign Agriculture Service projects global coffee production for 2025/26 will increase 2.5% year-over-year to a record 178.68 million bags. This includes a 0.5% year-over-year rise in Brazilian output to 65 million bags and Vietnam’s projected 6.9% year-over-year climb to 31 million bags.

Deforestation Regulations Create Policy Uncertainty

Complicating the supply picture, the European Parliament approved a 1-year delay to the deforestation law (EUDR) last Wednesday. This regulation aims to prevent coffee and other commodity imports from deforestation-prone regions in Africa, Indonesia, and South America. The delay means EU countries will continue importing agricultural products from these regions, keeping global supplies abundant and supporting price pressures on both arabica and robusta futures.

Mixed Signals Point to Volatile Trading Ahead

The International Coffee Organization reported on November 7 that global coffee exports for the current marketing year (October-September) fell 0.3% year-over-year to 138.658 million bags—a rare contraction that momentarily supported prices. However, this modest decline appears insufficient to offset the massive production increases projected for 2025/26, when FAS forecasts ending stocks will climb 4.9% to 22.819 million bags.

Currency dynamics, inventory mechanics, and tariff-driven demand destruction are providing near-term support, but the fundamental supply picture remains bearish for both coffee varieties heading into 2026.