Global Coffee Supply Surge Weighs on Robusta and Arabica Markets

Price Selloff Signals Shift in Market Sentiment

Coffee futures contracted sharply in recent trading as market participants reassess supply fundamentals. March arabica contracts (KCH26) slid 3.41% while March robusta (RMH26) declined 1.02%, marking a reversal from previous strength driven by weather concerns in Brazil.

The selloff reflects a confluence of bearish factors: rainfall forecasts across central Brazil have eased drought-related supply worries, a strengthening U.S. dollar has pressured commodities broadly, and expectations of record global coffee production have dampened price momentum.

Supply Expansion Pressures Both Coffee Varieties

Vietnam’s robusta output is accelerating at a pace that’s reshaping global market dynamics. The country’s coffee exports surged 17.5% year-over-year in 2025, reaching 1.58 million metric tons according to Vietnam’s National Statistics Office. Production forecasts paint an even more dramatic picture: Vietnam’s 2025/26 robusta crop is projected to climb 6.2% to 30.8 million metric tons (equivalent to 29.4 million bags), approaching a four-year peak.

Brazil’s arabica supply also appears set to expand despite recent weather volatility. Conab, Brazil’s federal crop forecasting agency, lifted its 2025 harvest estimate by 2.4% in December, now targeting 56.54 million bags versus 55.20 million bags forecast in September. This upward revision came even as Minas Gerais, the nation’s premier arabica region, experienced subnormal moisture levels—receiving only 47.9 mm of rain during the week through January 2, representing just 67% of the historical average.

Inventory Dynamics and Structural Oversupply

ICE robusta inventories fell to one-year lows in December before rebounding to five-week highs. Arabica stocks exhibited similar volatility, dropping to a 1.75-year low of 398,645 bags on November 20, then recovering to 461,829 bags by mid-week. These swings highlight the market’s sensitivity to supply signals.

U.S. buyers have materially reduced Brazilian coffee purchases, constrained by earlier tariff regimes. Although import duties have been scaled back, U.S. coffee holdings remain tight. From August through October—when tariffs were operative—American imports of Brazilian coffee plummeted 52% year-over-year to 983,970 bags, creating a structural deficit that has yet to fully normalize.

Record Production Outlook Pressures Long-Term Pricing

Global coffee production is anticipated to reach unprecedented levels in 2025/26. The USDA’s Foreign Agriculture Service projects worldwide output at 178.848 million bags, representing a 2% annual increase. Arabica production is forecast to slip 4.7% to 95.515 million bags, while robusta output is set to surge 10.9% to 83.333 million bags—a composition shift that favors lower-priced robusta varieties.

Brazil’s harvest, despite Conab’s optimistic revisions, is expected to decline 3.1% to 63 million bags according to FAS estimates, suggesting the country’s growth cycle may be moderating. By contrast, Vietnam’s output trajectory remains steeply upward.

The International Coffee Organization noted in November that global coffee exports for the October-to-September marketing year fell 0.3% year-over-year to 138.658 million bags, though this reflects the current tightness that supply forecasts suggest will unwind considerably.

What’s Ahead for Coffee Prices

Ending stocks for 2025/26 are projected to contract 5.4% to 20.148 million bags from 21.307 million bags in 2024/25, indicating some structural support. However, expectations of robust harvests across major producing regions—particularly Vietnam’s acceleration—suggest the supply-demand equation is tilting decisively bearish. Weather in Brazil and Vietnam remains a variable worth monitoring, but the consensus points toward abundant availability restraining price recovery in the near term.