Brazil's Dry Weather Triggers Divergent Trends in Global Coffee Futures

The global coffee market delivered mixed signals this week, with arabica and robusta futures moving in opposite directions. March arabica contracts rallied 1.60 points (+0.43%) to close at fresh 4-week highs, while March robusta contracts retreated 68 points (-1.70%). This divergence reflects deeper structural shifts reshaping coffee supply chains and investor sentiment.

The Arabica Rally: A Dry Spell Supports Prices

Brazil’s arabica market is drawing support from an unexpected ally—insufficient rainfall across its premier growing regions. According to Somar Meteorologia, Minas Gerais, which dominates Brazil’s arabica production landscape, experienced a notably weak rainy season. For the week ending January 2, the region recorded just 47.9 mm of precipitation, representing only 67% of the long-term average. This moisture deficit raises concerns about yield potential and has underpinned upward price momentum.

Currency dynamics are amplifying this support. The Brazilian real strengthened to 1-month highs against the US dollar this week, making dollar-denominated coffee sales less attractive for Brazilian exporters. This reluctance to sell at current levels has tightened near-term supply availability, providing additional lift to arabica valuations.

Robusta Under Siege: Vietnam’s Export Surge Creates Headwinds

The robusta market faces mounting pressure from an entirely different source—a flood of Vietnamese supplies overwhelming global demand. Vietnam’s coffee exports surged 17.5% year-over-year during 2025, reaching 1.58 million metric tons. This export acceleration reflects the country’s position as the planet’s largest robusta producer and its aggressive expansion strategy.

Looking ahead, Vietnam’s robusta ambitions show no signs of moderating. The country’s 2025/26 production is projected to climb 6% annually to 1.76 million metric tons (29.4 million bags), marking a 4-year production peak. The Vietnam Coffee and Cocoa Association indicated that favorable weather could push output even higher, potentially 10% above the previous crop year’s levels.

Storage Signals: Inventory Trends Tell Competing Stories

Global stockpile data presents a nuanced picture. ICE-monitored arabica inventories have been volatile, tumbling to a 1.75-year nadir of 398,645 bags in mid-November before recovering to 461,829 bags by this week. For robusta, inventory behavior mirrors this pattern—December lows of 4,012 lots have since normalized to 4,278 lots, though remaining historically constrained.

These inventory swings suggest ongoing supply tightness, particularly for arabica, which has supported price resilience despite competing bearish factors elsewhere in the market.

The Tariff Aftershock: US Import Patterns Show Persistent Fragility

The aftermath of elevated US import duties on Brazilian coffee continues reverberating through purchase patterns. From August through October 2024, when Trump-era tariffs were in force, American coffee buyers slashed Brazilian purchases by 52% year-over-year to just 983,970 bags. Although tariff rates have since normalized, US coffee inventories remain depleted—a hangover effect that may continue supporting prices as American roasters attempt to rebuild reserves.

Production Outlook: Brazil Raises Forecast While Vietnam Accelerates

Brazil’s crop forecasting agency, Conab, raised its 2025 production estimate by 2.4% to 56.54 million bags in early December, suggesting ample supplies ahead. However, this outlook conflicts with tighter USDA projections. The US Department of Agriculture’s Foreign Agriculture Service forecasted that Brazil’s 2025/26 output will actually decline 3.1% year-over-year to 63 million bags—a notable discrepancy suggesting elevated uncertainty in crop assessments.

Vietnam’s trajectory stands in stark contrast. The FAS projects Vietnam’s 2025/26 output at 30.8 million bags, reflecting a 6.2% year-over-year increase and marking the nation’s highest production in four years.

The Big Picture: Global Supply Expansion Meets Structural Headwinds

The International Coffee Organization reported that global coffee exports during the current marketing year fell just 0.3% annually to 138.658 million bags—a surprisingly modest decline given production uncertainties. The FAS, meanwhile, forecasted that world coffee production in 2025/26 will expand 2.0% to a record 178.848 million bags.

However, this aggregate growth masks important compositional shifts. Arabica output is projected to contract 4.7% to 95.515 million bags, while robusta surges 10.9% to 83.333 million bags. These opposing forces explain this week’s price divergence: arabica benefits from supply pressure, while robusta suffers from a production surge overwhelmingly focused on Vietnam.

Ending global stocks are expected to shrink 5.4% to 20.148 million bags by the end of 2025/26, suggesting that despite production gains, overall availability will remain constrained—a dynamic that could provide periodic support to both arabica and robusta contracts as seasonal demand patterns unfold.