Global Coffee Supply Tightens While Weather Disruptions Push Prices Higher

March arabica coffee futures finished Monday at 357.60 cents per pound, up 1.90 cents (+0.54%), while March ICE robusta coffee closed at 3,906 cents per ton, gaining 26 cents (+0.67%). The gains reflect mounting concerns over global coffee availability and production vulnerabilities across key growing regions.

Weather and Supply Shocks Drive Near-Term Support

Coffee benchmarks climbed to their highest levels in 1.5 weeks as unfavorable conditions took center stage. Brazil’s Minas Gerais region—the country’s primary arabica belt—received only 11.1 mm of rainfall during the week ended December 26, representing just 17% of the historical average, according to Somar Meteorologia. This precipitation deficit coincides with the critical flowering and development phase for the upcoming crop cycle.

Indonesia faces an even more acute challenge. Widespread flooding has damaged approximately one-third of the country’s arabica farms in northern Sumatra, with industry experts warning that coffee exports could contract by as much as 15% during the 2025-26 season, according to the Association of Indonesian Coffee Exporters and Industry. As the world’s third-largest robusta producer, supply disruptions here carry global market implications. While robusta crops remain relatively less affected, the northern arabica impact is notable.

Inventory Dynamics Offer Mixed Signals

ICE arabica inventories hit a 1.75-year low of 398,645 bags on November 20 before recovering to 456,477 bags last Wednesday. Robusta stockpiles similarly dipped to a 1-year low of 4,012 lots on December 10 and have since stabilized at 4,278 lots. While inventory compression typically supports prices, recent recoveries suggest some stabilization within the warehouse system.

Production Estimates Point to Record Harvests Ahead

The longer-term outlook presents a more complex picture. Brazil’s crop forecasting agency, Conab, raised its 2025 production estimate by 2.4% to 56.54 million bags in early December, up from the September projection of 55.20 million bags. Meanwhile, the USDA’s Foreign Agriculture Service projected that world coffee production in 2025/26 will reach a record 178.848 million bags, representing a +2.0% year-on-year increase. This includes a -4.7% decline in arabica output to 95.515 million bags but a robust +10.9% surge in robusta to 83.333 million bags.

Vietnamese Exports Pressuring Robusta Values

Vietnam, the world’s largest robusta producer, reported a sharp acceleration in export activity. November shipments jumped 39% year-over-year to 88,000 MT, with January-November cumulative exports rising 14.8% year-over-year to 1.398 million MT. The Vietnam Coffee and Cocoa Association indicated that 2025/26 production could climb 10% above the prior year if weather cooperates, positioning output at 30.8 million bags—a 4-year high according to USDA projections. This supply expansion acts as a headwind for robusta values specifically.

Tariff Relief Signals Shifting Trade Patterns

US coffee demand dynamics have begun to shift. During the August-October period when elevated tariffs on Brazilian imports were in effect, American purchases of Brazilian coffee plummeted 52% year-over-year to 983,970 bags. Recent tariff reductions have reopened the door to larger volumes, though US domestic inventories remain relatively constrained, suggesting room for import growth.

Market Outlook: Supply Abundance Versus Near-Term Tightness

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, indicating modest contraction despite robust production pipelines. The USDA forecast that 2025/26 ending stocks will contract 5.4% to 20.148 million bags from 21.307 million bags in the current season.

Price support from weather-driven supply anxiety appears temporary, as abundant inventories and record-setting production forecasts suggest that current rally strength faces structural headwinds into 2026. However, regional disruptions in Brazil and Indonesia may sustain price floors in the near term, particularly if precipitation deficits and flood damage persist into the January-March planting window.