Arabica Coffee Finds Support As Brazilian Real Strengthens

The arabica coffee market posted modest gains on Thursday as currency movements triggered fresh trading activity. The surge in the Brazilian real to a 2.25-month high against the US dollar sparked short covering among futures traders, reversing earlier losses. This currency strength presents a double-edged scenario: while it bolsters Brazil’s domestic economy, it simultaneously discourages coffee producers from exporting, supporting prices through supply-side constraints.

Currency Dynamics Drive Price Recovery

The Brazilian real’s rally proved instrumental in the arabica coffee recovery. When Brazil’s currency strengthens, local producers receive fewer reals per dollar of export revenue, making it less attractive to sell into global markets. This natural supply friction provided underlying support for arabica coffee futures as traders covered short positions throughout the session.

However, robusta coffee contracts moved in the opposite direction, closing down 0.52 points (-1.28%), suggesting the currency support was primarily benefiting the arabica complex.

Weather Concerns and Inventory Pressures Create Headwinds

Arabica coffee initially declined Thursday morning following rain forecasts for Brazil’s key growing regions. The Weather Channel projected daily showers throughout the week in Minas Gerais, the nation’s largest arabica-producing area, which could temporarily ease supply concerns but dampens prices near-term.

More significantly, ICE-monitored warehouse inventories for arabica rebounded to a 2.5-month high of 461,829 bags last Wednesday, rising from a 1.75-year low of 398,645 bags set in November. Robusta stocks similarly recovered to 4,532 lots, up from a 1-year low of 4,012 lots recorded in December. This inventory rebuilding dynamic typically weighs on commodity prices as traders assess adequate stockpile levels.

Brazilian Export Challenges Paint Mixed Picture

Brazil’s coffee export trends reveal structural challenges. According to Cecafe data, the nation’s December green coffee shipments fell 18.4% year-over-year to 2.86 million bags. Within this, arabica coffee exports specifically declined 10% annually to 2.6 million bags, while robusta shipments plummeted 61% to just 222,147 bags.

These export declines suggest production constraints or logistical issues, which would normally support prices. Yet Minas Gerais received only 33.9 mm of rainfall during the week ending January 16—just 53% of historical averages—indicating drought stress that could limit future yields.

Global Supply Expansion Complicates the Outlook

Brazil’s government crop agency Conab raised its 2025 production estimate by 2.4% to 56.54 million bags in early December, suggesting ample supplies ahead. More pressuring for arabica coffee, though, is the explosive growth in Vietnam’s robusta production.

Vietnam’s coffee exports surged 17.5% year-over-year to 1.58 million metric tons in 2025, while production projections climbed 6% to 1.76 million metric tons (29.4 million bags)—a 4-year high. The Vietnam Coffee and Cocoa Association indicated that 2025/26 output could reach 10% above the prior crop if weather cooperates, making Vietnam an increasingly dominant force in global robusta supplies.

On the broader front, the International Coffee Organization reported that global coffee exports fell 0.3% year-over-year to 138.658 million bags for the current marketing year, pointing toward tighter supplies overall.

USDA Projections Signal Record Production Ahead

The USDA’s Foreign Agriculture Service projected world coffee production for 2025/26 at a record 178.848 million bags, up 2.0% year-over-year. However, the composition matters: arabica production is forecast to decline 4.7% to 95.515 million bags while robusta climbs 10.9% to 83.333 million bags.

Brazil specifically faces headwinds, with production expected to slip 3.1% to 63 million bags, even as Vietnam’s output rises 6.2% to 30.8 million bags. Ending global stocks are projected to fall 5.4% to 20.148 million bags from the prior year’s 21.307 million bags, suggesting eventual tightening conditions.

What This Means for Arabica Coffee Traders

Arabica coffee remains caught between competing forces: supportive currency and export challenges offset by rising global inventory levels and expanding Vietnamese supply. The near-term price trajectory will likely depend on whether weather-driven production concerns in Brazil resurface or whether ample warehouse stocks continue to pressure values.

The march contract settled Thursday with modest gains, reflecting this equilibrium between support and headwinds—a dynamic likely to persist until clearer production signals emerge from the Southern Hemisphere’s growing season.