Global Supply Disruptions Drive Coffee Futures Price Volatility Amid Brazilian Currency Strength

Coffee futures markets are experiencing mixed signals as geopolitical and weather-related disruptions reshape global supply expectations. March arabica coffee futures climbed +1.02% today, while March robusta contracts declined -0.18%, reflecting the complexity of current market dynamics.

Currency Movements and Brazilian Export Dynamics

The Brazilian real’s rally to a 2-week high against the dollar has become a critical driver for coffee futures pricing. As the currency strengthens, Brazilian coffee exporters face reduced incentives to sell internationally, triggering short covering across arabica positions. This dynamic highlights how currency fluctuations directly influence agricultural commodity markets beyond traditional supply-demand mechanics. Simultaneously, previous US tariffs on Brazilian coffee imports had severely dampened purchasing—August through October imports from Brazil plummeted 52% year-over-year to just 983,970 bags when tariffs were in effect. Though tariffs have since been reduced, US coffee inventories remain constrained, supporting prices despite the tariff rollback.

Indonesian Flooding Threatens Significant Export Reduction

Widespread flooding across Indonesia’s northern Sumatra region has emerged as a major supply concern, with approximately one-third of the country’s arabica coffee farms affected. The Association of Indonesian Coffee Exporters and Industry estimates potential export reductions of up to 15% in the 2025-26 season. This disruption pushed arabica futures to 2-week highs earlier this week. Indonesia ranks as the world’s third-largest robusta producer, making crop damage a material factor for global coffee futures markets.

Inventory Trends Supporting Price Floors

ICE-monitored arabica inventories hit a 1.75-year low of 398,645 bags on November 20, though they recovered to 456,477 bags by last Wednesday. Robusta stocks similarly bottomed at a 1-year low of 4,012 lots in early December before rebounding to 4,278 lots. These historically tight inventory levels provide underlying support for coffee futures despite mixed near-term signals.

Production Forecasts Show Divergent Regional Trends

Brazil’s coffee production estimate for 2025 rose 2.4% to 56.54 million bags, yet USDA projections suggest 2025-26 output will decline 3.1% year-over-year to 63 million bags. Vietnam presents the contrasting picture—coffee exports jumped 39% year-over-year in November to 88,000 MT, with full-year exports climbing 14.8%. Vietnam’s 2025-26 production is projected to reach 1.76 million metric tons (29.4 million bags), a 4-year high and 6% above the prior year.

Global Supply Outlook and Long-Term Price Implications

The International Coffee Organization reported global coffee exports for the current marketing year fell 0.3% year-over-year to 138.658 million bags. Looking ahead, the USDA projects world coffee production will increase 2.0% to a record 178.848 million bags in 2025-26, though arabica output is expected to drop 4.7% to 95.515 million bags while robusta production climbs 10.9%. Ending global stocks are forecast to decline 5.4% to 20.148 million bags.

These competing supply dynamics—Indonesian disruptions weighing against Vietnamese abundance—create the backdrop for coffee futures volatility. While inventory tightness and weather concerns provide price support, the outlook for ample global supplies and rising Vietnamese output restrains upside potential for arabica and robusta contracts alike.