Coffee Market Faces Price Correction as Global Supply Outlook Strengthens

Coffee futures delivered a mixed performance on Friday, with arabica contracts posting a notable decline while robusta showed resilience. March arabica coffee slipped 1.29% to hit its lowest point in four months, whereas January robusta coffee edged up 0.11%. The divergent movement reflects contrasting supply dynamics shaping each coffee variety.

Brazil’s Rainfall Boosts Arabica Supply Concerns

Recent weather developments in Brazil have significantly shifted market sentiment. Climatempo forecasted intense and sustained rainfall across Brazil’s coffee belt this week, alleviating previous drought anxieties. Data from Somar Meteorologia revealed that Minas Gerais—the country’s leading arabica-producing region—received 79.8 mm of rain during the week ending December 12, substantially above the 155% historical average.

This moisture boost has prompted production upgrades. Brazil’s crop forecasting agency Conab raised its 2025 coffee output estimate by 2.4% to 56.54 million bags in early December, up from the September projection of 55.20 million bags. The enlarged supply outlook has directly pressured arabica prices downward as traders repriced risk.

Robusta Supply Surge from Major Producer Strains Market

Vietnam, the world’s largest producer of robusta coffee, continues to expand its export volumes. Data released by Vietnam’s National Statistics Office showed November coffee exports surged 39% year-over-year to 88,000 metric tons, with January through November exports climbing 14.8% to 1.398 million metric tons. Looking ahead, Vietnam’s 2025/26 coffee production is projected to reach 1.76 million metric tons—equivalent to 29.8 million bags—marking a four-year peak and representing 6% annual growth.

The Vietnam Coffee and Cocoa Association indicated that favorable weather could push 2025/26 production 10% higher than the previous season. This supply abundance continues to weigh on robusta pricing despite underlying inventory tightness.

Mixed Inventory Signals Complicate Price Outlook

Exchange-monitored stockpiles present a complex picture. ICE arabica inventories dropped to a 1.75-year trough of 398,645 bags on November 20, though they rebounded to 439,257 bags by Friday. ICE robusta reserves fell to an 11.5-month minimum of 4,012 lots last Wednesday, indicating structural supply constraints in spot markets.

Yet these supportive inventory dynamics clash with the expanding production forecasts. The International Coffee Organization reported that global coffee exports for the October-September marketing year declined 0.3% year-over-year to 138.658 million bags—a signal that despite adequate supplies, export channels remain modestly constrained.

Brazil’s Export Weakness Offers Limited Support

Green coffee exports from Brazil fell 27% year-over-year in November to 3.3 million bags, according to the export group Cecafe. This contraction partly reflects the impact of previous US tariff policies. US coffee purchases from Brazil during August through October—when Trump administration tariffs were active—collapsed 52% to 983,970 bags compared to the prior year. Though subsequent tariff relief has eased some trade friction, American coffee inventory positions remain tight, limiting near-term import recovery.

USDA Forecasts Record Global Production in 2025/26

The USDA’s Foreign Agriculture Service released projections Thursday indicating world coffee production will expand 2.0% in 2025/26 to reach an unprecedented 178.848 million bags. However, the growth is unevenly distributed: arabica output is forecast to decline 4.7% to 95.515 million bags while robusta climbs 10.9% to 83.333 million bags.

By region, Brazil’s 2025/26 production is expected to slip 3.1% to 63 million bags, whereas Vietnam’s output will accelerate 6.2% to a four-year high of 30.8 million bags. These projections suggest continued pressure on arabica values alongside robusta supply expansion, culminating in ending stocks declining 5.4% to 20.148 million bags for the 2025/26 season.