Global Coffee Supply Glut Weighs on Quotes, Despite Some Stabilizing Factors

The coffee market faces mounting headwinds from ample global supplies, pressuring both arabica and robusta quotes in recent trading. March arabica coffee (KCH26) declined 2.31% to close at a 2-week low, while January ICE robusta coffee (RMF26) dropped 1.79% to reach a 2.25-month low. This downward momentum reflects growing concerns about oversupply across major producing regions.

Supply Surge from Key Producers Drives Market Pessimism

Brazil’s production outlook has expanded significantly, underpinning bearish sentiment in the coffee market. Conab, the country’s crop forecasting agency, elevated its 2025 coffee production estimate by 2.4% to 56.54 million bags from the previous September forecast of 55.20 million bags. Looking further ahead, StoneX issued a particularly dovish projection on November 19, forecasting that Brazil will harvest 70.7 million bags in the 2026/27 marketing year—a 29% year-over-year surge—with arabica accounting for 47.2 million bags of this total.

Vietnam, the world’s leading robusta coffee producer, is also ramping up output. The country’s November coffee exports jumped 39% year-over-year to 88,000 MT, while cumulative January through November shipments climbed 14.8% year-over-year to 1.398 million metric tons. Looking ahead, Vietnam’s 2025/26 coffee output is projected to climb 6% year-over-year to 1.76 million metric tons, or 29.4 million bags—marking a 4-year high. The Vietnam Coffee and Cocoa Association (Vicofa) suggested in late October that production could run 10% higher than the prior crop year if weather cooperates.

The USDA’s Foreign Agriculture Service (FAS) corroborated this broader supply expansion, projecting on June 25 that world coffee production in 2025/26 will increase 2.5% year-over-year to a record 178.68 million bags. Within this total, robusta production is expected to climb 7.9% year-over-year to 81.658 million bags, though arabica output is forecast to decline 1.7% year-over-year to 97.022 million bags.

Regulatory Tailwinds Compound Supply Pressures

A regulatory development further amplified supply concerns. On November 26, the European Parliament approved a 1-year delay to the deforestation law (EUDR), which removes near-term constraints on coffee imports from regions experiencing deforestation. This extension allows EU countries to continue purchasing agricultural products from Africa, Indonesia, and South America, effectively sustaining supply channels that might otherwise have faced restrictions. The deferred enforcement has essentially removed a potential supply-tightening catalyst from the market equation.

Additionally, global coffee exports have softened in the current marketing year. The International Coffee Organization (ICO) reported on November 7 that global coffee exports for the October-September marketing year fell 0.3% year-over-year to 138.658 million bags, suggesting that despite record production expectations, actual shipment flows have moderated.

Structural Support from Inventory Drawdowns and Climate Factors

Despite the supply overhang, certain market dynamics are providing price support. US tariffs on Brazilian coffee imports have triggered a notable realignment in American purchasing patterns. US coffee purchases from Brazil during the August-October period—when President Trump’s tariffs took effect—plummeted 52% year-over-year to 983,970 bags. This tariff-driven demand destruction has tightened ICE monitored arabica inventories, which touched a 1.75-year low of 398,645 bags on November 20, though they recovered somewhat to 426,523 bags last Friday.

ICE robusta coffee inventory positions have also compressed, with stockpiles falling to an 11.5-month low of 4,021 lots on Monday. About one-third of America’s unroasted coffee derives from Brazil, making tariff disruptions particularly impactful for US supply chains as American buyers have voided new Brazilian coffee contracts.

Climate conditions in Brazil’s primary growing region are adding marginal support as well. Somar Meteorologia reported Monday that Minas Gerais, the country’s largest arabica-producing area, received only 11 mm of rainfall during the week ended December 5—just 17% of the historical average. Below-normal precipitation typically benefits coffee trees by reducing disease pressure, though prolonged drought would pose risks.

Market Outlook and Production Estimates

The FAS forecasts that Brazil’s 2025/26 coffee production will inch up 0.5% year-over-year to 65 million bags, while Vietnam’s output is expected to rise 6.9% year-over-year to a 4-year peak of 31 million bags. Global ending stocks are anticipated to climb 4.9% to 22.819 million bags in 2025/26 from 21.752 million bags in 2024/25, suggesting ample supplies will persist through the forecast horizon.

The interplay between surging production from Brazil and Vietnam, regulatory delays that keep supply channels open, and modest demand destruction from tariffs has created a complex pricing environment. While inventory compression and weather factors offer limited support, the overwhelming fundamentals point toward an extended period of supply abundance pressuring coffee quotes.