Global Coffee Market Reshuffled: How Weather Shocks and Regional Disruptions Are Steering Prices Higher

Coffee futures are notching gains as a confluence of supply-side headwinds reshape market dynamics. March arabica contracts climbed +1.05 (+0.30%), while March ICE robusta futures advanced +17 (+0.44%), pushing prices to 1.5-week highs as traders recalibrate supply expectations.

Rainfall Deficit in Brazil’s Coffee Belt Raises Production Concerns

The primary price catalyst traces back to Brazil’s diminished precipitation. In Minas Gerais—home to the nation’s largest arabica operations—weekly rainfall through December 26 measured just 11.1 mm, representing merely 17% of the long-term average. This moisture shortfall has triggered renewed anxiety about crop viability and yield potential heading into the 2025/26 season.

The weather pressure is particularly notable given that Brazil remains the world’s dominant coffee supplier. While Brazil’s crop forecasting authority, Conab, lifted its 2025 production estimate by 2.4% to 56.54 million bags in early December, forward-looking USDA projections paint a more cautious picture: coffee output is expected to decline 3.1% year-over-year to 63 million bags in 2025/26.

Indonesia and Vietnam Add to Supply Chain Volatility

Beyond rainfall concerns in Brazil, Indonesia’s flooding crisis has emerged as a secondary shock. Inundation across northern Sumatra has compromised approximately one-third of the country’s arabica acreage, with exporters warning of potential shipment reductions of up to 15% during the 2025-26 cycle. As the world’s third-largest robusta producer, supply disruptions there reverberate across global inventory levels.

Vietnam, conversely, is amplifying supply rather than constraining it. The nation’s November coffee exports surged 39% year-over-year to 88,000 MT, with January-through-November shipments climbing 14.8% to 1.398 million MT. Production forecasts point to a 6% year-over-year surge in 2025/26 output to 1.76 million MT—a four-year peak—assuming weather cooperates. Vietnam’s robusta dominance means this abundance is exerting downward pressure on the robusta complex specifically.

Inventory Dynamics and US Demand Patterns

ICE-tracked arabica stocks declined to a 1.75-year low of 398,645 bags on November 20, though they subsequently recovered to 456,477 bags last Wednesday. Robusta inventories similarly touched a one-year low of 4,012 lots on December 10 before rebounding to 4,278 lots by midweek. These tighter reserve levels provide structural support to prices.

US purchasing behavior has shifted markedly. During the August-October period when elevated tariffs on Brazilian coffee imports were in place, American buyers curtailed purchases by 52% year-over-year to 983,970 bags. Even with tariff relief now in effect, US coffee inventories remain comparatively lean, potentially underpinning near-term demand.

2025/26 Outlook: Record Production Against Tightening Stocks

The USDA Foreign Agriculture Service’s December 18 assessment projects world coffee production climbing 2.0% year-over-year to a record 178.848 million bags in 2025/26. This masks divergent trends: arabica output is forecast to retreat 4.7% to 95.515 million bags, while robusta expansion accelerates 10.9% to 83.333 million bags. The robusta surge—driven by Vietnam and Indonesia—reflects ample supplies that will likely cap price upside for that variety.

Critically, global ending stocks are anticipated to shrink 5.4% year-over-year to 20.148 million bags, down from 21.307 million bags in 2024/25. This inventory contraction, combined with localized supply disruptions and rainfall deficits in key growing regions, creates the conditions for sustained price support despite abundant Vietnamese supplies entering the market.

The International Coffee Organization reported in November that global coffee exports for the current marketing year (October-September) declined 0.3% year-over-year to 138.658 million bags, signaling that export momentum has begun to cool even as production capacity expands. This dynamic—where production gains are outpaced by demand and inventory drawdowns—remains the structural backdrop supporting prices in the near to medium term.