Brazil's Weather and Vietnamese Supply Rewrite Coffee Market as Robusta Coffee Retreats

Coffee futures delivered mixed signals today, with March arabica coffee (KCH26) climbing 1.30 points to close up 0.39%, while March ICE robusta coffee (RMH26) declined 92 points and slipped 2.24%. The divergence reflects deeper market tensions between weather-driven supply expectations in Brazil and surging production forecasts from Vietnam, the world’s largest robusta coffee producer.

Market Signals Point to Conflicting Pressures

The modest arabica rebound appears technical in nature, emerging after prices failed to pierce last Friday’s 5.5-month low. Some short-covering lifted the contract into positive territory, suggesting buyers stepped in at depressed levels. However, robusta coffee’s slide to a 4-week low tells a different story—one of abundant supply concerns that are systematically weighing on the entire coffee complex.

This price divergence captures the core dilemma facing coffee traders. On one hand, record rainfall in Brazil’s coffee heartland should support future yields and economic returns for growers. On the other hand, the prospect of ample coffee supplies moving forward creates bearish pressure on prices today.

Brazilian Rains: Yield Booster, Price Suppressor

Somar Meteorologia, Brazil’s leading weather service, reported that Minas Gerais—Brazil’s premier arabica coffee-growing region—received 69.8 mm of rainfall during the week ended January 30, representing 117% of the historical weekly average. This above-average moisture is genuinely positive for crop development.

Yet the market’s reaction has been predictably negative. Conab, Brazil’s official crop forecasting agency, raised its total 2025 production estimate by 2.4% to 56.54 million bags on December 4, up from a September forecast of 55.20 million bags. The prospect of a larger Brazilian harvest, combined with already elevated inventory levels, pressures prices as traders price in future supply abundance.

Vietnam’s Robusta Coffee Explosion Reshapes Supply Dynamics

While Brazilian conditions tighten slightly, Vietnam is flooding the market with robusta coffee supplies. Vietnam’s National Statistics Office reported on January 5 that the nation’s 2025 coffee exports surged 17.5% year-over-year to 1.58 million metric tons. This robust shipment pace underscores the structural shift in global coffee supply—toward robusta coffee in particular.

The production outlook reinforces this trend. Vietnam’s 2025/26 coffee production is projected to climb 6% year-over-year to 1.76 million metric tons, representing 29.4 million bags. The Vietnam Coffee and Cocoa Association (Vicofa) indicated on October 24 that Vietnamese output in 2025/26 could be 10% higher than the prior crop year if weather cooperates. For traders, this means robusta coffee supply growth is structural and likely to persist.

Inventory Recovery Signals Ample Supply Ahead

ICE warehouse inventories are sending cautionary signals. After hitting a 1.75-year low of 398,645 bags on November 20, arabica inventories recovered to a 2.5-month high of 461,829 bags by January 14. Similarly, robusta coffee stock levels at ICE warehouses fell to a 1-year low of 4,012 lots on December 10 but rebounded to a 1.75-month high of 4,609 lots last Friday.

This inventory recovery pattern is textbook bearish: it signals growing supply availability just as traders are reassessing global production figures upward. When warehouse stocks start climbing after recent lows, it typically presages softer prices ahead.

Brazilian Export Contraction Offers Limited Support

One potential price-supportive factor emerged from Brazil’s export data. Cecafe reported that Brazil’s total December green coffee exports fell 18.4% to 2.86 million bags, with arabica coffee exports down 10% year-over-year to 2.6 million bags and robusta coffee exports collapsing 61% year-over-year to just 222,147 bags.

This sharp export decline is unexpected given rising production forecasts—but it reflects timing dynamics rather than fundamental supply tightness. Export weakness may provide temporary price support, yet it cannot offset the longer-term headwinds from global supply expansion.

Global Production Forecasts Underscore Supply Abundance

The International Coffee Organization (ICO) reported on November 7 that global coffee exports for the current marketing year (October-September) fell 0.3% year-over-year to 138.658 million bags. This marginal decline masks larger shifts underneath.

The USDA’s Foreign Agricultural Service (FAS) provided more detailed production guidance on December 18, projecting that world coffee production in 2025/26 will expand 2.0% year-over-year to a record 178.848 million bags. Notably, arabica production is forecast to decline 4.7% to 95.515 million bags, while robusta coffee production is poised to surge 10.9% to 83.333 million bags.

By country, the FAS forecasts Brazil’s 2025/26 output will decline 3.1% year-over-year to 63 million bags—a rare retreat. Conversely, Vietnam’s 2025/26 production is projected to rise 6.2% to a 4-year high of 30.8 million bags, with robusta coffee representing the vast majority of those gains. Ending global coffee stocks for 2025/26 are expected to fall 5.4% to 20.148 million bags from 21.307 million bags in 2024/25, yet this inventory reduction may prove insufficient to support prices given the production rebalancing toward robusta coffee.

The Bottom Line

Coffee markets face a structural transition. Brazilian weather support and inventory recovery clash with exploding Vietnamese robusta coffee supplies and record global coffee production forecasts. Until robusta coffee supply growth slows or demand accelerates meaningfully, price pressure is likely to persist despite sporadic technical rallies in arabica.