Global Coffee Supply Surge Pressures Market as Arabica and Robusta Retreat

The coffee commodity market is experiencing a significant correction as improved production prospects across major growing regions reshape price dynamics. March arabica contracts dropped 2.00% to KCH26 levels, while January ICE robusta futures declined 2.13% in RMF26 trading, extending a two-week downward trend that has pushed arabica to its lowest point in three weeks and robusta to four-month lows.

Supply-Side Fundamentals Driving Price Direction

The primary driver behind the recent commodity weakness stems from enhanced precipitation patterns across Brazil’s coffee belt. Climatempo’s forecast of “intense and persistent rainfall” anticipated throughout this week in major coffee-growing areas has eased previous drought concerns. Data from Somar Meteorologia reveals that Minas Gerais, Brazil’s principal arabica-producing region, accumulated 79.8 mm of precipitation during the week ending December 12—representing 155% of historical norms.

These weather developments translate directly into upgraded production estimates. Brazil’s Conab agency revised its 2025 production outlook upward by 2.4%, establishing a new forecast of 56.54 million bags compared to September’s projection of 55.20 million bags. On the robusta side, Vietnam’s production momentum remains robust, with the country’s National Statistics Office confirming November coffee shipments surged 39% year-over-year to 88,000 MT, while cumulative January-November exports climbed 14.8% annually to 1.398 MMT.

Long-Term Production Projections Weigh on Sentiment

The USDA’s Foreign Agriculture Service projects that 2025/26 global coffee production will increase 2.5% year-over-year to a record 178.68 million bags. This expansion masks divergent trends within the two primary varieties: arabica production is anticipated to contract 1.7% to 97.022 million bags, while robusta output will expand 7.9% to 81.658 million bags. Vietnam, as the world’s largest robusta producer, is expected to increase its 2025/26 output 6.9% year-over-year to 31 million bags—marking a four-year peak. Vietnam’s Coffee and Cocoa Association indicated potential for 10% growth in the 2025/26 crop should favorable weather persist.

Market Inventory Dynamics Present Mixed Signals

ICE-monitored arabica stockpiles declined to a 1.75-year low of 398,645 bags on November 20, though they recovered to 426,523 bags (a five-week high) by December 5. Robusta inventories fell to an 11.5-month nadir of 4,012 lots during the same period. These inventory contractions typically provide price support, yet their positive influence is being overwhelmed by forward-looking supply abundance.

Brazil’s export activity tells an interesting story. Cecafe reported that November green coffee exports fell 27% year-over-year to 3.3 million bags, suggesting demand weakness or logistics constraints. Conversely, US coffee purchases of Brazilian beans dropped 52% between August and October (when tariffs were in effect) to 983,970 bags, indicating that US inventory constraints persist despite tariff reductions.

Market Outlook: Supply Abundance vs. Inventory Tightness

The International Coffee Organization reported that global coffee exports for the current marketing year declined marginally (0.3% year-over-year) to 138.658 million bags as of November 7. Looking ahead, FAS projects that ending stocks for 2025/26 will increase 4.9% to 22.819 million bags from 21.752 million bags in 2024/25—a development that reinforces the bearish supply outlook currently dominating commodity price action.

The divergence between near-term inventory support and longer-term supply growth creates a complex trading environment where price discovery reflects competing fundamental narratives.