Arabica Coffee Futures Rally as Dollar Slump Boosts Prices

Arabica coffee futures surged on Monday, with March contracts (KCH26) closing +5.35 points, representing a +1.52% gain. Meanwhile, March robusta contracts (RMH26) climbed +55 points, or +1.33%. The rally reflected broad support from a weakening U.S. dollar, which declined another -0.5% to hit a 4-month low. This currency weakness has created tailwinds across commodity markets, with coffee among the primary beneficiaries.

Dollar Weakness Provides Primary Tailwind for Arabica Coffee Futures

The continuous slide in the dollar index has proven bullish for commodity-denominated markets. A weaker greenback makes commodities cheaper for international buyers, typically spurring demand. For arabica coffee futures, this currency depreciation arrives at a critical moment when supply dynamics are increasingly complex and shifting. The inverse relationship between dollar strength and commodity prices remains one of the most reliable dynamics in global markets, and Monday’s trading reflected this pattern clearly.

Brazilian Coffee Supply Constraints Reinforce Price Support

Brazil, the world’s dominant arabica producer, continues to face weather-related headwinds that support higher prices. Minas Gerais, Brazil’s largest arabica-growing region, received only 33.9 mm of rainfall during the week ending January 16—a significant shortfall representing just 53% of the historical average. This below-average precipitation threatens crop development and production prospects.

Export data from Cecafe reinforces supply tightness. Brazil’s total green coffee exports fell -18.4% in December to 2.86 million bags, with arabica shipments declining -10% year-over-year to 2.6 million bags. Robusta exports showed even steeper declines, sliding -61% y/y to just 222,147 bags. These shrinking outflows from the world’s largest producer provide tangible support for arabica coffee futures prices.

Conab, Brazil’s crop forecasting agency, raised its 2025 production estimate by 2.4% to 56.54 million bags in early December, but this projection pales against the longer-term bullish backdrop created by weather stress and export restraint. The combination of near-term supply constraints and production uncertainty has created a supportive environment.

Inventory Recovery and Vietnamese Competition Create Headwinds

However, arabica coffee futures face countervailing pressures. ICE-monitored arabica inventories, while hitting a 1.75-year low of 398,645 bags on November 20, have since recovered to 461,829 bags as of January 14—their highest level in 2.5 months. Similarly, robusta stockpiles fell to 1-year lows before bouncing to 4,609 lots by late January. This inventory rebuilding could eventually weigh on prices if supplies continue accumulating.

Vietnam, the world’s largest robusta producer, is emerging as a significant supply source. Vietnam’s 2025 coffee exports jumped +17.5% year-over-year to 1.58 million metric tons, according to the country’s National Statistics Office. Projections indicate Vietnam’s 2025/26 production will surge +6% y/y to 1.76 MMT (29.4 million bags)—the highest level in four years. The Vietnam Coffee and Cocoa Association has suggested output could climb even higher if favorable weather persists.

Global Market Dynamics and 2025/26 Production Outlook

The International Coffee Organization reported in November that global coffee exports for the current marketing year fell modestly by -0.3% year-over-year to 138.658 million bags, indicating relative tightness. However, the longer-term outlook presents complexity.

The USDA’s Foreign Agriculture Service project world coffee production in 2025/26 will increase by +2.0% y/y to a record 178.848 million bags. Yet this aggregate masks divergent trends: arabica production is forecast to decline -4.7% to 95.515 million bags while robusta output surges +10.9% to 83.333 million bags. Brazil’s 2025/26 output is expected to contract -3.1% to 63 million bags, while Vietnam’s harvest is projected to rise 6.2% y/y to 30.8 million bags.

Critically, FAS forecasts that 2025/26 ending stocks will contract -5.4% to 20.148 million bags, falling from 21.307 million bags in 2024/25. This declining inventory picture, combined with shifting regional production patterns, suggests the fundamental backdrop for arabica coffee futures remains nuanced, with near-term support tempered by emerging supply developments from Vietnam and other regions.