Brazil's Weather Woes and Global Supply Dynamics Push Coffee Share Price and Market Sentiment Higher

The coffee market is experiencing notable momentum today, with March arabica futures climbing +0.65% and March ICE robusta contracts advancing +19 (+0.48%). Arabica has touched a 4-week high, signaling renewed investor interest in this critical commodity.

Global Supply Outlook Reshaping Coffee Share Price Dynamics

Recent production forecasts are redefining market expectations. The USDA’s Foreign Agriculture Service released its December 18 outlook projecting world coffee production in 2025/26 will increase by 2.0% year-over-year to a record 178.848 million bags. However, the breakdown reveals diverging trends: arabica production is expected to decline 4.7% to 95.515 million bags, while robusta output surges 10.9% to 83.333 million bags. This structural shift is creating winners and losers across global coffee markets.

Vietnam, the dominant robusta supplier, is accelerating production. The country’s 2025 coffee exports jumped 17.5% year-over-year to 1.58 million metric tons, with 2025/26 output projected to climb 6% year-over-year to 1.76 MMT (29.4 million bags)—a 4-year high. The Vietnam Coffee and Cocoa Association indicated that favorable weather conditions could push output an additional 10% higher. This surge in robusta supply is constraining gains in that market segment.

Brazil’s situation differs markedly. While Conab, Brazil’s crop forecasting agency, raised its 2025 production estimate by 2.4% to 56.54 million bags, the USDA projects 2025/26 production will decline 3.1% year-over-year to 63 million bags. As the world’s largest arabica producer, Brazil’s trajectory directly influences global pricing.

Weather and Currency Effects Catalyze Near-Term Strength

Below-average rainfall in Brazil is supporting arabica prices today. Somar Meteorologia reported that Minas Gerais, Brazil’s premier arabica region, received 47.9 mm of rain during the week ending January 2—only 67% of historical averages. Dry conditions in a major production zone typically trigger supply concerns and underpin futures valuations.

Currency movements amplify this effect. The Brazilian real rallied to a 1-month high against the dollar on Tuesday, making exports less attractive for Brazilian producers and dampening selling pressure. This currency strength is indirectly supporting coffee share price momentum by reducing export volume incentives.

Inventory Trends Paint a Mixed Picture

ICE arabica inventories have stabilized but remain relatively tight. Monitored stocks fell to a 1.75-year low of 398,645 bags on November 20 but recovered to a 2.5-month high of 461,829 bags by Wednesday. Similarly, ICE robusta inventories bottomed at a 1-year low of 4,012 lots on December 10, rebounding to 4,278 lots by December 23-24. These inventory stabilizations suggest neither extreme tightness nor excess supply at the exchange level.

However, US inventory positions tell a different story. American buyers significantly reduced Brazilian coffee purchases during the Trump tariff period (August-October). Purchases fell 52% year-over-year to 983,970 bags during this interval. Although tariffs have since been reduced, US coffee stocks remain constrained, implying continued demand for replacement purchases.

Conflicting Long-Term Signals

The outlook for global coffee supplies presents a complex picture. The International Coffee Organization reported on November 7 that global exports for the current marketing year fell 0.3% year-over-year to 138.658 million bags—a modest decline signaling tightness. Yet the USDA’s longer-term projection indicates world production will reach record levels in 2025/26.

Most significantly, FAS forecasts that 2025/26 ending stocks will fall 5.4% to 20.148 million bags from 21.307 million bags in 2024/25. Declining year-end inventories could support coffee share price resilience, even as production records loom. The tension between ample production and declining carryover supplies will likely define market volatility in the months ahead.