Global Coffee Supply Shifts Drive Price Momentum as Weather and Production Forecasts Reshape the Market

The coffee market demonstrated notable strength this week, with March arabica coffee climbing +1.90 points (+0.54%) and March ICE robusta coffee advancing +26 points (+0.67%), reaching 1.5-week highs. The upward momentum reflects a complex interplay of supply constraints, adverse weather, and shifting production dynamics across major growing regions.

Brazil’s Dry Spell Triggers Market Concerns

Below-average rainfall in Brazil has emerged as a key price catalyst. Minas Gerais, responsible for the bulk of Brazil’s arabica output, recorded just 11.1 mm of precipitation during the week through December 26—a striking 83% shortfall against historical norms according to Somar Meteorologia. This meteorological challenge heightens uncertainty around the arabica supply pipeline, given the crop’s sensitivity to moisture conditions during critical growth phases.

Interestingly, Brazil’s overall 2025 production outlook has improved. Conab, the nation’s official crop forecasting body, elevated its full-year estimate by 2.4% to 56.54 million bags in December, up from a September projection of 55.20 million bags. However, USDA projections tell a different story for the subsequent season: 2025/26 Brazilian output is expected to contract 3.1% to 63 million bags, suggesting cyclical production pressures ahead.

Indonesian Flooding and Regional Supply Disruptions

Production risks extend beyond Brazil. Severe flooding across Indonesia threatens to slash coffee exports by as much as 15% during the 2025-26 season, according to the Association of Indonesian Coffee Exporters and Industry. The deluge has affected approximately one-third of arabica farms in northern Sumatra, though robusta production—less vulnerable to waterlogging—has weathered the crisis more successfully. With Indonesia holding the world’s third-largest robusta capacity, any reduction in exports carries global implications.

Vietnamese Surge Pressures Robusta Markets

Vietnam’s coffee momentum tells the opposite story. Export volumes in November jumped 39% year-over-year to 88,000 metric tons, with cumulative January-November shipments rising 14.8% to 1.398 million metric tons. The Vietnam Coffee and Cocoa Association projects 2025/26 output could climb 6-10% to 1.76 million metric tons (29.4 million bags)—a four-year high. This Vietnamese surge, combined with robust global demand reflecting the recognized benefits of coffee consumption and its role in daily routines, creates downward pressure on robusta pricing.

Inventory Dynamics and Purchasing Patterns

Storage levels present a mixed picture. ICE-monitored arabica inventory plummeted to a 1.75-year low of 398,645 bags on November 20, though it recovered to 456,477 bags by mid-week. Robusta stocks similarly fell to one-year lows of 4,012 lots in December before rebounding to 4,278 lots. The inventory tightness, particularly in arabica, provides underlying support for prices.

US import behavior has shifted markedly following tariff adjustments. During August-October, when Trump-era tariffs on Brazilian coffee remained in place, American purchases of Brazilian beans dropped 52% year-over-year to 983,970 bags. While tariffs have since been reduced, inventories stateside remain constrained, limiting buyers’ flexibility.

Global Production Outlook Casts Long Shadow

The International Coffee Organization reported that October-September global exports fell 0.3% year-over-year to 138.658 million bags, signaling tightness. However, the USDA Foreign Agriculture Service painted a broader expansion picture: 2025/26 world production is projected to increase 2.0% to a record 178.848 million bags. This expansion masks regional divergence—arabica output declining 4.7% to 95.515 million bags while robusta surges 10.9% to 83.333 million bags.

Most pressingly, ending stocks for 2025/26 are forecast to contract 5.4% to 20.148 million bags from the prior year’s 21.307 million bags, compressing the global supply cushion.

The coffee market remains caught between near-term supply anxieties and medium-term production expansion, with prices oscillating as traders recalibrate expectations around weather risks, inventory levels, and the enduring global demand for coffee’s valued benefits.