Global Coffee Market Faces Headwinds as Production Forecasts Signal Abundance

The coffee market is experiencing sustained pressure as both arabica and robusta coffee futures have retreated to four-month lows this week. March arabica coffee contracts are trading down 0.05 points (-0.01%), while January robusta coffee is down 14 points (-0.37%). The recent selloff reflects growing concerns about an oversupply scenario, though prices have staged a modest rebound amid dollar weakness and short-covering activity in futures markets.

Brazil’s Ample Rainfall Transforms Supply Narrative

Weather conditions in Brazil’s coffee belt have shifted the supply narrative decisively in recent days. Brazil’s crop forecasting agency Conab delivered a significant revision upward, raising its 2025 coffee production estimate by 2.4% to 56.54 million bags from the previous September projection of 55.20 million bags. This upward revision came as meteorological data painted a picture of abundant moisture across key producing regions.

Climatempo reported Monday that intense and persistent rainfall is expected to continue this week throughout Brazil’s coffee-growing areas. Meanwhile, Somar Meteorologia documented that Minas Gerais—Brazil’s largest arabica coffee region—received 79.8 mm of rainfall during the week ending December 12, representing 155% of the historical average. This moisture surplus has eased previous worries about crop development, creating a bearish environment for prices.

The Brazilian real’s weakness adds another layer of pressure on the market. The currency fell to a 4.5-month low against the dollar, a dynamic that incentivizes Brazil’s coffee producers to accelerate export sales. As the real weakens, exporters receive more local currency per dollar of sales, encouraging greater supply releases into the market.

Vietnam’s Robusta Production at Center of Supply Story

Vietnam’s coffee sector is contributing significantly to the expanding global supply outlook. The country’s National Statistics Office reported that November coffee exports surged 39% year-over-year to 88,000 MT, with January-through-November cumulative exports rising 14.8% year-over-year to 1.398 MMT. Vietnam remains the world’s dominant robusta coffee producer, meaning its output trends directly influence global robusta coffee dynamics.

Looking ahead, Vietnam’s 2025/26 coffee production is projected to climb 6% year-over-year to 1.76 MMT, equivalent to 29.4 million bags and representing a four-year high. The Vietnam Coffee and Cocoa Association indicated in October that output could reach 10% higher than the previous crop if weather conditions remain supportive. These production increases represent a structural headwind for robusta coffee prices.

Mixed Signals from Inventory and Tariff Dynamics

The inventory picture presents a more nuanced story. ICE-monitored arabica coffee inventories have shown volatility, falling to a 1.75-year low of 398,645 bags on November 20 before recovering to 426,938 bags by Wednesday. Robusta coffee inventories similarly compressed, reaching an 11.5-month low of 4,012 lots last week. Declining inventory levels typically provide price support, though they appear insufficient to offset broader supply concerns.

Tariff dynamics have also influenced the market structure. American buyers significantly reduced Brazilian coffee purchases during August through October, when U.S. tariffs were in effect, with volumes plummeting 52% compared to the same period last year to 983,970 bags. While tariffs have since been eased, U.S. coffee inventories remain relatively constrained, limiting the scope for immediate import acceleration.

Brazil’s export activity reinforces the supply abundance narrative. Coffee exporter group Cecafe reported that Brazil’s November green coffee exports fell 27% year-over-year to 3.3 million bags, though this monthly decline should be contextualized within the broader seasonal pattern and expanded full-year production forecast.

Global Supply Trajectory Points to Production Expansion

The International Coffee Organization reported on November 7 that global coffee exports for the October-September marketing year declined 0.3% year-over-year to 138.658 million bags, suggesting relatively stable trade flows despite market turbulence. However, forward-looking production data paints a different picture.

The USDA’s Foreign Agriculture Service projected in June that world coffee production in 2025/26 will increase 2.5% year-over-year to a record 178.68 million bags. This expansion masks divergent trends between varietal types: arabica production is forecast to decline 1.7% to 97.022 million bags, while robusta production will surge 7.9% to 81.658 million bags. Brazil’s production is expected to edge up 0.5% to 65 million bags, while Vietnam’s output should climb 6.9% to a four-year high of 31 million bags.

The ending stocks forecast underscores the growing supply picture. FAS projections indicate that 2025/26 ending stocks will expand 4.9% to 22.819 million bags from 21.752 million bags in the prior year. This inventory build contradicts any near-term bullish supply narratives and reinforces the structural headwinds facing both arabica coffee and robusta coffee markets.