Global Coffee Supply Dynamics: Production Shifts and Price Pressures Reshape Market Outlook

Coffee futures registered modest gains today as the market grapples with competing supply narratives. March arabica coffee advanced +1.05 points (+0.30%), while March ICE robusta coffee rose +17 points (+0.44%), both approaching 1.5-week highs amid shifting production expectations across major growing regions.

Regional Supply Challenges Amplify Price Volatility

Adverse weather patterns in Brazil continue to underpin commodity values. Minas Gerais, which accounts for the bulk of Brazil’s arabica output, experienced significantly below-normal precipitation levels during the week ending December 26—recording only 11.1 mm of rain, representing merely 17% of the long-term average. The moisture deficit has triggered fresh concerns about crop viability throughout the primary growing belt.

Indonesia faces an equally pressing challenge from different meteorological extremes. Severe flooding has devastated arabica cultivation zones in northern Sumatra, potentially constraining the nation’s coffee shipments by as much as 15% during the 2025-26 marketing year, according to officials from the Association of Indonesian Coffee Exporters and Industry. Roughly one-third of the country’s arabica farms have sustained damage from recent inundation events. As the world’s third-largest robusta producer, Indonesia’s production setbacks reverberate through global markets, though robusta crops have proven more resilient to flooding compared to their arabica counterparts.

Market Inventory Signals Mixed Resilience

The inventory landscape presents a nuanced picture of supply tightness. ICE-monitored arabica stockpiles deteriorated to a 1.75-year nadir of 398,645 bags in mid-November before stabilizing at 456,477 bags last Wednesday—a 2-month peak. Robusta inventories demonstrated similar volatility, plunging to a 1-year low of 4,012 lots on December 10 and rebounding to a 4-week high of 4,278 lots by mid-week. These fluctuations underscore underlying tension between spot demand and forward supply expectations.

U.S. import dynamics reflect the residual impact of recent trade policy shifts. Brazilian coffee purchases by American importers collapsed by 52% from August through October 2024 versus the prior-year period, declining to 983,970 bags as tariff barriers discouraged transactions. While those levies have since been reduced, U.S. coffee inventories remain constrained relative to historical norms, limiting the market’s ability to absorb price volatility.

Production Forecasts Point Toward Abundance

Longer-term supply projections suggest mounting headwinds for price elevation. Brazil’s domestic crop forecaster, Conab, elevated its 2025 production estimate by 2.4% to 56.54 million bags in early December, signaling robust harvests despite localized weather setbacks. This upward revision from September’s 55.20 million-bag forecast indicates the resilience of Brazil’s average agricultural output across broader geographic areas.

Vietnam’s export momentum accelerated sharply throughout 2024. The country’s November coffee shipments surged 39% year-over-year to 88,000 metric tons, with January-through-November cumulative exports climbing 14.8% to 1.398 million metric tons. Vietnam’s 2025/26 production trajectory is projected to climb 6% annually to 1.76 million metric tons—equivalent to 29.4 million bags and marking a 4-year zenith. As the planet’s predominant robusta producer, Vietnam’s expanding harvest weighs heavily on robusta price trajectories.

Global Market Equilibrium: Production Gains Offset Regional Constraints

The International Coffee Organization documented that global coffee exports during the current marketing year (October-September cycle) declined marginally by -0.3% year-over-year to 138.658 million bags, reflecting tighter near-term availability even as longer-term prospects suggest abundance.

The USDA Foreign Agriculture Service’s December 18 projection painted a bullish supply picture for 2025/26. Global coffee production is forecast to expand +2.0% year-over-year to a record 178.848 million bags. However, this aggregate growth masks divergent trajectories: arabica production is expected to contract -4.7% to 95.515 million bags, while robusta output surges +10.9% to 83.333 million bags. Brazil’s specific output is projected to decline -3.1% to 63 million bags, whereas Vietnam’s harvest is anticipated to reach 30.8 million bags, representing a +6.2% increase and 4-year high.

Critically, ending stocks for the 2025/26 season are forecast to diminish -5.4% to 20.148 million bags from 21.307 million bags in 2024/25, signaling tightness at marketing year conclusion despite near-term production gains.

The confluence of regional supply disruptions, inventory compression, and production-forecast revisions continues to create a volatile price environment where near-term supply constraints clash with medium-term abundance expectations.