Global Coffee Supply Surge Pressures Futures Markets as Brazil Weather Shifts

Market Dynamics: Arabica and London Robusta Coffee Futures Retreat Amid Supply Abundance

The coffee futures market experienced notable weakness this week, with March arabica coffee futures (KCH26) declining 3.41% and March ICE robusta coffee (RMH26) dropping 1.02%. At the core of this pullback lies a confluence of factors: anticipated rainfall across Brazil’s central regions—the world’s largest arabica supplier—has dissipated drought concerns that previously supported prices, while concurrent strength in the U.S. dollar has amplified selling pressure across commodity markets.

Supply Chain Shifts: Vietnam’s Export Boom and Brazil’s Production Surge

Vietnam’s robusta dominance is becoming increasingly pronounced in global markets. The country’s coffee exports surged 17.5% year-over-year in 2025, reaching 1.58 million metric tons according to Vietnam’s National Statistics Office. This production momentum is expected to intensify, with forecasts predicting Vietnam’s 2025/26 output could reach 1.76 million metric tons (29.4 million bags)—a four-year high representing a 6% annual increase. The Vietnam Coffee and Cocoa Association (Vicofa) suggests conditions could support an even more bullish outcome, potentially delivering a 10% year-on-year jump if weather patterns remain favorable.

Meanwhile, Brazil’s supply picture is expanding on the arabica side. The country’s crop forecasting agency, Conab, upgraded its 2025 harvest estimate by 2.4% to 56.54 million bags in December, signaling robust production capacity ahead.

Storage Dynamics and Import Constraints Reshape Price Support

Inventory levels paint a mixed picture. Arabica stocks tracked by ICE fell to a 1.75-year low of 398,645 bags in November before recovering to 461,829 bags by mid-week. Robusta inventories similarly bottomed in December but have since climbed to five-week highs. The temporary tightness provided momentary price support, though forward expectations of ample supplies are proving weightier.

Import flows into the United States reveal ongoing structural constraints. Between August and October—when tariffs on Brazilian coffee were elevated—U.S. imports plummeted 52% year-over-year to just 983,970 bags. Even with tariff reductions implemented subsequently, American coffee inventories remain constrained, limiting demand rebounds and contributing to downward price momentum.

Global Production Outlook: Record Volumes on the Horizon

The broader production picture reinforces bearish sentiment. The USDA’s Foreign Agriculture Service (FAS) projects global coffee production for 2025/26 will hit a record 178.848 million bags, a 2% increase year-over-year. This includes a 10.9% surge in london robusta coffee futures-supporting production (reaching 83.333 million bags) offset partially by a 4.7% decline in arabica output to 95.515 million bags.

The FAS forecasts Brazil’s 2025/26 harvest at 63 million bags—representing a 3.1% decrease—while Vietnam’s production trajectory climbs to 30.8 million bags, marking a six-year peak with a 6.2% annual acceleration.

Market Implications: Inventory Compression Ahead

Despite near-term supply pressures, the International Coffee Organization (ICO) reported November exports declined 0.3% year-over-year to 138.658 million bags, suggesting some tightening dynamics. However, FAS projections for ending stocks in 2025/26 paint a different narrative: inventory levels are forecast to contract 5.4% to 20.148 million bags from 21.307 million bags in the prior year, signaling the market faces structural inventory compression despite elevated global production volumes.

The interplay between record production forecasts, tightening inventory positions, and currency headwinds continues to define coffee futures dynamics, with london robusta coffee futures and arabica contracts reflecting competing near-term and medium-term supply narratives.