December's Brazilian Weather Forecast Sends Arabica and Robusta Futures Into Sharp Decline

Arabica coffee futures for March delivery (KCH26) tumbled 3.41% today, with robusta contracts (RMH26) dropping 1.02%, as traders reacted swiftly to forecasts predicting substantial rainfall sweeping through central Brazil next week. The precipitation projections have significantly reduced concerns about extended dry spells that previously supported elevated price levels. Simultaneously, the U.S. dollar hit a four-week peak, adding additional headwind to coffee and other commodity valuations.

What’s Weighing on the Market?

Vietnam’s robusta sector continues to pile on selling pressure. The nation’s coffee exports surged 17.5% year-over-year in 2025, reaching 1.58 million metric tons according to official statistics, a trend reflecting robust production momentum that’s flooding global markets. Over in Brazil—the world’s arabica heartland—the narrative has shifted dramatically since last Thursday’s four-week highs. Prior data showed Minas Gerais, the core arabica cultivation zone, received merely 47.9 mm of rainfall in early January, representing just 67% of normal seasonal levels. That supply-tightening narrative, however, is now being reversed by December’s weather forecasts.

Inventory Shifts Signal Market Stabilization

The ICE exchange recorded arabica stocks plunging to a 1.75-year low of 398,645 bags in November before rebounding to 461,829 bags by midweek—suggesting stabilization rather than acute scarcity. Robusta inventories followed a similar pattern, hitting one-year lows in December yet recovering to five-week highs subsequently. These recoveries indicate the market isn’t pricing in immediate supply emergencies.

U.S. importers have kept Brazilian coffee purchases restrained, even as previously imposed tariffs were trimmed. The import slowdown proved severe: August through October shipments contracted 52% year-over-year to just 983,970 bags. Domestic American inventories remain constrained, limiting near-term demand rebounding.

Brazil Production and Global Forecasts Reshape Expectations

Brazil’s agricultural authorities, Conab, boosted their December estimates for 2025/26 production by 2.4%, projecting 56.54 million bags versus the September forecast of 55.20 million bags. This upward revision reflects improved expectations post-drought concerns, further pressuring prices downward.

Vietnam’s output trajectory tells a similar story of abundance. The 2025/26 crop is anticipated to climb 6% annually to 1.76 million metric tons (29.4 million bags), marking a four-year peak. Industry associations project potential 10% expansion if weather cooperates, cementing Vietnam’s position as the dominant robusta supplier.

The Bigger Picture: Global Supplies at Record Heights

According to the USDA Foreign Agriculture Service’s December report, worldwide coffee production for 2025/26 is forecast to hit a record 178.848 million bags—a 2% increase year-over-year. While arabica output is expected to decline 4.7% to 95.515 million bags, robusta production jumps 10.9% to 83.333 million bags. The FAS projects Brazil’s harvest contracting 3.1% to 63 million bags, though Vietnam’s output climbs 6.2% to 30.8 million bags.

The International Coffee Organization noted that global exports during the current marketing year fell a modest 0.3% year-over-year to 138.658 million bags in November, signaling relatively stable trade flows. However, ending stocks for 2025/26 are predicted to slide 5.4% to 20.148 million bags from 21.307 million bags in the prior period, suggesting eventual tightening ahead.

The coffee market today embodies the tension between immediate weather-driven reprieve and longer-term production surges set to flow into global channels throughout 2025 and beyond.