Brazil's Rain Forecast Triggers Global Coffee Selloff—Here's What's Really Happening

Coffee futures took a beating Wednesday. March arabica dropped 3.31%, while January robusta slid 1.25%. The culprit? Rain forecasts for Brazil’s coffee belt.

On the surface, this looks counterintuitive—rain should be good for crops, right? Here’s the thing: markets price in supply increases immediately. Heavy showers expected late this week through next week signal better yields ahead, which spells oversupply concerns. Climatempo’s forecast essentially told traders: brace for a production boost.

The Tariff Plot Twist

But there’s a wrinkle. Prices had actually been climbing the past two days despite rain chatter, because of the tariff situation. Trump dropped some reciprocal tariffs on non-US-grown commodities, but here’s the catch—Brazil still faces a separate 40% tariff on “national emergency” grounds (tied to Bolsonaro prosecution). That 40% shield remains uncertain for US importers.

Result? US coffee buyers are ghosting Brazilian contracts. Imports from Brazil tanked 52% from Aug-Oct this year vs. last year, dropping to 983,970 bags. Since Brazil supplies roughly a third of America’s unroasted coffee, this is creating real tightness.

Inventory Crunch vs. Production Surge

ICE arabica inventories just hit a 1.75-year low at 396,513 bags; robusta fell to a 4-month low of 5,648 lots. Usually this would be bullish, but it’s getting buried by supply growth projections.

Brazil’s expected 2026/27 output is forecast at 70.7 million bags (+29% y/y), with arabica at 47.2 million bags. Meanwhile, Vietnam—the world’s robusta powerhouse—is ramping up too: 2025/26 output is projected at 1.76 MMT (29.4 million bags), a 4-year high and +6% y/y.

Global coffee exports for the current marketing year actually fell 0.3% y/y to 138.658 million bags (per ICO), but forecasters see 2025/26 world production climbing 2.5% y/y to a record 178.68 million bags.

The Bottom Line

Coffee faces a supply wall. Rain in Brazil is just the latest confirmation. Tariffs are keeping short-term US supplies tight, but the medium-term outlook is drowning in oversupply signals. Traders are pricing in the coming glut, and Wednesday’s selloff says they’re not convinced tariffs will be enough to support prices long-term.