Global Coffee Market Finds Support Amid Production Headwinds and Inventory Tightness

Coffee futures posted modest gains on Monday as supply-side pressures offset concerns about production abundance. March arabica coffee advanced +0.54%, closing at higher levels, while March ICE robusta coffee rose +0.67%. The market’s upward momentum reflects a complex interplay of regional weather disruptions, inventory dynamics, and shifting demand patterns.

Regional Weather Disruptions Tighten Near-Term Supply Outlook

Brazil’s arabica coffee belt experienced notably slack rainfall patterns during late December, prompting upward price revision. Minas Gerais, Brazil’s dominant arabica-producing region, recorded merely 11.1 mm of precipitation in the week ending December 26—representing just 17% of historical norms. This moisture deficit has intensified crop stress concerns among market participants.

Southeast Asia simultaneously grapples with hydrological extremes. Indonesia confronts widespread flooding that threatens to curtail robusta exports by approximately 15% during the 2025-26 season, according to industry exporters. Northern Sumatra’s arabica farms, which comprise roughly one-third of the nation’s arabica cultivation, face heightened crop damage risk. Indonesia’s robusta production—the world’s third-largest output—remains comparatively less impaired by current weather events.

Inventory Metrics Present Mixed Signals for Price Direction

ICE-monitored arabica reserves declined to 1.75-year lows of 398,645 bags on November 20, subsequently recovering to 456,477 bags by mid-January. Robusta inventory positions followed a similar pattern, hitting 1-year lows of 4,012 lots in early December before rebounding to 4,278 lots. Despite these recent recoveries, storage levels remain historically constrained, providing underlying support to futures valuations.

US coffee procurement patterns underscore inventory constraints domestically. American importers reduced Brazilian coffee purchases by 52% from August-October 2024 versus the prior year, accumulating only 983,970 bags as tariff policies discouraged cross-border transactions. Although those trade barriers have since eased, US inventory positions remain relatively depleted.

Production Forecasts Reveal Divergent Trends Across Key Origins

Brazil’s aggregate 2025 coffee output projection climbed to 56.54 million bags following a December revision by Conab, representing a 2.4% increase from September estimates. Yet global production dynamics tell a more nuanced story. The USDA’s Foreign Agriculture Service projects 2025/26 world output will reach a record 178.848 million bags, with arabica production declining 4.7% to 95.515 million bags while robusta surges 10.9% to 83.333 million bags.

Vietnam’s expanding production capacity poses particular significance for robusta markets. The nation’s November coffee exports jumped 39% year-over-year to 88,000 metric tons, with January-November shipments rising 14.8% annually to 1.398 million metric tons. Production forecasts suggest 2025/26 Vietnamese output will climb 6% year-over-year to 1.76 million metric tons (29.4 million bags), marking a 4-year peak. Should weather conditions remain favorable, some industry associations project output could reach 10% above prior-year levels.

This abundance pressures robusta valuations despite arabica’s relative supply tightness. Vietnam maintains the world’s largest robusta production footprint, making its output expansion particularly influential on global price equilibrium.

Global Trade and Ending Stocks Paint a Cautious Picture

The International Coffee Organization reported that global coffee exports for the current marketing year (October-September) decreased marginally by 0.3% year-over-year to 138.658 million bags, suggesting export momentum remains relatively muted despite production increases elsewhere.

Looking forward, FAS projections indicate 2025/26 ending stocks will compress 5.4% to 20.148 million bags from 21.307 million bags in 2024/25. This reserve drawdown, while modest, reflects tightening market dynamics as production gains concentrate disproportionately in robusta-dominated regions. Meanwhile, arabica output contraction to 95.515 million bags reinforces differential pricing pressures between the two coffee varieties.

Brazil’s projected 2025/26 production decline of 3.1% year-over-year to 63 million bags further illustrates supply vulnerability in higher-quality arabica segments, where weather resilience proves increasingly consequential for global price trajectories.