Arabica Coffee Rebounds as Brazil's Dry Weather Tightens Global Supply Picture

Arabica coffee futures posted a solid gain on Monday, climbing +2.05% (+0.57%), while robusta coffee contracts declined -0.91%, reflecting divergent supply dynamics between the two major coffee varieties.

Brazil’s Rainfall Deficit Fuels Arabica Rally

The primary driver behind arabica’s outperformance lies in Brazil’s below-average precipitation patterns. Minas Gerais, the world’s leading arabica-growing region, received just 47.9 mm of rain in the week ending January 2—a mere 67% of historical norms, according to Somar Meteorologia. This moisture shortfall has become a key bullish factor for arabica prices, as concerns over crop stress mount.

Compounding this weather-related support, Brazil’s currency strengthened to a 3-week high against the dollar. A stronger real typically dampens export incentives for Brazilian coffee producers, potentially reducing selling pressure in the near term.

Vietnam’s Robusta Surge Weighs on Competing Variety

In stark contrast, robusta coffee faces headwinds from Vietnam’s aggressive export expansion. Vietnam’s National Statistics Office revealed Monday that 2025 coffee exports surged +17.5% year-over-year to 1.58 million metric tons—a significant jump that has eased global supply concerns for robusta coffee and pressured prices to a one-week low.

Storage Data Signals Mixed Signals

ICE-monitored arabica inventory levels have shown volatility, falling to a 1.75-year low of 398,645 bags in November before recovering to 456,477 bags by late December. Robusta stocks similarly traded sideways, dropping to a one-year low of 4,012 lots in mid-December before bouncing to 4,278 lots by month-end.

US Demand Remains Subdued Despite Tariff Relief

American coffee purchases experienced a notable shock during the Trump tariff period. US imports of Brazilian coffee from August through October plummeted 52% to 983,970 bags compared to the same 2024 period. Although those tariffs have since been reduced, US coffee inventory levels remain constrained, suggesting purchasing demand could accelerate if prices stabilize.

Global Production Outlook Tilts Toward Abundance

Brazil’s crop forecasting agency, Conab, raised its 2025 production estimate by 2.4% to 56.54 million bags in December, signaling a more abundant supply picture. Meanwhile, Vietnam’s robusta output is projected to climb 6% year-over-year to 1.76 million metric tons (29.4 million bags) for 2025/26—a four-year high. The Vietnam Coffee and Cocoa Association suggested production could reach 10% above the prior crop year if weather cooperates.

The USDA’s Foreign Agriculture Service forecasts global coffee production in 2025/26 will reach a record 178.848 million bags, up 2.0% year-over-year. However, arabica output is expected to decline 4.7% to 95.515 million bags, while robusta production surges 10.9% to 83.333 million bags—a structural shift favoring the robusta market.

Bottom Line: Supply Abundance Likely to Cap Further Gains

While arabica coffee has found support from weather concerns in Brazil, the broader global backdrop remains tilted toward ample supplies. Ending stocks are projected to fall just 5.4% to 20.148 million bags by season’s end, suggesting the market will struggle to sustain significant upside without a major supply disruption. Traders should monitor Brazil’s weather forecasts and Vietnam’s export pace as key indicators for directional moves ahead.