Brazil's Dry Weather Boosts Arabica While Vietnam's Export Surge Pressures Robusta

Coffee futures displayed divergent momentum Monday, with arabica climbing +2.05% to close higher while robusta retreated -36 points (-0.91%), sliding to 1-week lows. The mixed performance underscores a fundamental shift in global coffee market dynamics shaped by competing supply signals.

Drought Conditions Support Arabica Rally

Arabica prices found solid footing as precipitation deficits in Brazil’s primary growing regions threatened near-term output. Minas Gerais, Brazil’s leading arabica production zone, recorded just 47.9 mm of rainfall during the week ended January 2—only 67% of the historical norm—according to Somar Meteorologia data. This below-average moisture has become a key bullish driver for arabica futures.

Currency movements amplified the support for arabica producers. Brazil’s real strengthened to a 3-week peak against the dollar Monday, making arabica shipments less attractive at current prices and potentially constraining export volume from the world’s top arabica supplier.

Vietnam’s Robusta Surge Weighs on Prices

Robusta traded under considerable pressure as Vietnam flooded markets with massive export volumes. The country’s 2025 coffee shipments surged +17.5% year-over-year to reach 1.58 million metric tons (MMT), according to Vietnam’s National Statistics Office. As the planet’s largest robusta producer, Vietnam’s robust export activity has eased supply anxieties and capped upside potential for robusta contracts.

Production forecasts suggest Vietnam’s momentum will persist. The country’s 2025/26 output is projected to climb +6% annually to 1.76 MMT (29.4 million bags)—a 4-year high—with potential for 10% additional gains if weather cooperates, the Vietnam Coffee and Cocoa Association indicated in October.

Global Supply Outlook Tilts Bearish

The international coffee market faces structural headwinds from expanding production. The USDA’s Foreign Agriculture Service projected world coffee output in 2025/26 will reach a record 178.848 million bags, rising +2.0% year-over-year. However, this hides a critical divergence: arabica production is expected to decline -4.7% to 95.515 million bags while robusta climbs +10.9% to 83.333 million bags.

Brazil’s crop, despite being the largest globally, faces its own challenges. Conab, Brazil’s official crop forecaster, lifted its 2025 production estimate by 2.4% to 56.54 million bags in December—yet the USDA projects 2025/26 Brazilian output will actually fall -3.1% year-over-year to 63 million bags, reflecting post-harvest reality.

Inventory Dynamics Show Mixed Signals

ICE-monitored supplies present a nuanced picture. Arabica stocks hit a 1.75-year low of 398,645 bags on November 20 before recovering to 456,477 bags by late December, suggesting stabilization at lower-than-normal levels. Robusta inventories similarly bottomed at a 1-year low of 4,012 lots December 10 and rebounded to 4,278 lots by week-end, indicating tightness despite record production projections.

Global coffee shipments for the current marketing year (October-September) fell -0.3% year-over-year to 138.658 million bags through November, per the International Coffee Organization, signaling near-term supply constraints remain in place.

US Import Dynamics Stabilize

American coffee purchases faced headwinds from elevated tariffs on Brazilian imports during the Trump administration’s initial tariff period. US purchases of Brazilian coffee from August through October plummeted 52% year-over-year to just 983,970 bags when tariffs were active. Though tariff rates have since been reduced, US coffee inventories remain historically compressed, supporting cautious buying patterns even as import costs normalize.

The outlook hinges on whether tightening arabica supplies will offset robusta’s structural abundance in coming months.