Arabica Coffee Prices Weaken Amid Favorable Brazilian Rain Outlook

Arabica coffee futures retreated sharply in recent trading, with March contracts posting a decline of 5.50 points (-1.57%), while robusta coffee moved in the opposite direction, gaining 34 points (+0.82%). The divergent price action reflected starkly different weather patterns emerging across the world’s two largest coffee-producing regions, signaling how localized conditions can dramatically reshape commodity valuations in a matter of days.

Weather Divergence Shapes Near-Term Price Movement

The primary headwind for arabica coffee came from forecasts of consistent rainfall expected across Minas Gerais, Brazil’s critical coffee-producing hub, over the coming week. Steady precipitation in the region typically benefits crop development and alleviates drought concerns, reducing supply constraints. Conversely, robusta coffee drew support from projected dry conditions in Vietnam’s Central Highlands, the country’s dominant growing zone, which may stress yields and tighten output over the next 10 days.

This weather divergence underscores a fundamental dynamic in global coffee markets: what helps one region’s production outlook often pressures another region’s price. Brazil, the world’s largest arabica producer, remained the primary focus for price movement, as investors calibrated expectations around the nation’s vast harvests.

Inventory Recovery and Supply Forecasts Create Mixed Signals

While weather patterns dominated short-term sentiment, longer-term supply indicators painted a more complex picture. ICE arabica inventories bottomed at a 1.75-year low of 398,645 bags on November 20 but subsequently rebounded to 461,829 bags by mid-January, representing a 2.5-month peak. Similarly, robusta stockpiles dipped to a 1-year low of 4,012 lots in early December before climbing to 4,609 lots by the following week.

The inventory recovery, though modest, signaled tightening supply concerns were beginning to ease. This recovery ran counter to the near-term bullish narratives around arabica coffee and suggested that near-term tightness may be gradually dissolving. Meanwhile, Brazilian arabica exports experienced notable weakness, contracting 10% year-on-year to 2.6 million bags in December, according to recent Cecafe data, while robusta shipments plummeted 61% annually to 222,147 bags.

Production Outlook and Export Dynamics Drive Market Sentiment

On the supply side, Brazil’s crop forecasting authority raised its 2025 production estimate by 2.4% to 56.54 million bags from the prior September projection. This upward revision, though incremental, signaled confidence in a robust harvest despite some weather variability. The USDA Foreign Agriculture Service further projected that Brazil’s 2025/26 output would eventually decline 3.1% to 63 million bags, hinting at cyclical production patterns that could eventually support prices.

Vietnam’s coffee sector showed entirely different momentum. The nation’s 2025 exports surged 17.5% year-on-year to 1.58 million metric tons, and production is anticipated to climb 6% annually to 1.76 million metric tons, or approximately 29.4 million bags—a 4-year high. The Vietnam Coffee and Cocoa Association suggested output could rise as much as 10% if weather conditions prove favorable, potentially flooding global markets with supplies.

Global Supply Equilibrium: The Longer View

The International Coffee Organization reported that global coffee exports for the current marketing year fell a marginal 0.3% year-on-year to 138.658 million bags, hinting at modest tightening. However, the USDA’s broader outlook painted a different narrative: world coffee production in 2025/26 is projected to expand 2.0% to a record 178.848 million bags. Within this total, arabica production is forecast to contract 4.7% to 95.515 million bags, while robusta output surges 10.9% to 83.333 million bags.

The supply trajectory suggests arabica coffee faces structural headwinds from rising robusta competition and expanding Vietnamese production, even as some regional tightness persists. Ending global stocks are anticipated to decline 5.4% to 20.148 million bags, still pointing to adequate supply cushions that could pressure arabica coffee valuations over the coming months.