Next week's coffee: Price is expected to continue facing pressure from abundant supply

Market Today: Arabica and Robusta Both Plunge

Today’s trading session saw both major coffee grades weaken. March futures contracts (KCH26) for arabica lost 3.41%, while ICE Robusta futures (RMH26) declined 1.02%. Two main factors are heavily impacting the market: first, forecasts of abundant rainfall in central Brazil—the world’s top Arabica coffee region—helping to ease previous drought concerns; second, the US dollar surged to its highest level in 4 weeks, exerting pressure on all commodities.

Global Supply: What’s Changing?

Last Thursday, Arabica prices reached a 4-week high due to unusually low rainfall in Brazil. According to Somar Meteorologia, Minas Gerais—home to the largest concentration of Arabica farms in the country—recorded only 47.9 mm of rain in the week ending January 2, 67% of the annual average. However, the situation has quickly changed.

Brazil’s crop forecasting agency Conab recently raised its 2025 production forecast by 2.4%, to 56.54 million bags, higher than the September forecast of 55.20 million bags. Similarly, Vietnam’s outlook is positive: coffee exports in 2025 increased by 17.5% year-over-year, reaching 1.58 million tons. Moreover, according to the Vietnam Coffee - Cocoa Association (Vicofa), the 2025/26 production could increase by an additional 6% compared to the same period (reaching 1.76 million tons or 29.4 million bags)—the highest in 4 years—if weather conditions remain favorable.

Stocks: Mixed Signals from the Market

Stock levels have shown notable changes. Arabica stocks managed by ICE fell to a record low of 398,645 bags on November 20 (the lowest in 1.75 years), but have since recovered to 461,829 bags by Wednesday afternoon—highest in 2.5 months. Robusta stocks also experienced similar fluctuations: hitting a yearly low in December but now rebounding to the highest level in 5 weeks.

US Market: Impact of Tax Policies

US importers have cut coffee orders from Brazil partly due to high import tariffs. Although tariffs were recently reduced, during the (August-October) period, Brazilian coffee imports into the US still declined by 52% compared to last year, totaling only 983,970 bags. As a result, coffee inventories in the US market remain tight.

Coffee Price Forecast for Next Week: Risks from Ample Supply

According to the semi-annual report from the Foreign Agricultural Service (FAS) of USDA published on December 18, global coffee production in 2025/26 is expected to reach a record 178.848 million bags, up 2% from the previous year. Robusta will see a strong increase of 10.9% to 83.333 million bags, while Arabica will decrease by 4.7% to 95.515 million bags. Brazil’s 2025/26 output is forecasted to decline by 3.1% to 63 million bags, but Vietnam is expected to increase by 6.2% to 30.8 million bags—its highest in 4 years.

Supply Outlook: Long-term Perspectives

Data from the International Coffee Organization (ICO) shows that global coffee exports for the current crop year (October to September next year) decreased by 0.3% year-over-year, to 138.658 million bags. End-of-year stocks for 2025/26 are projected to decline by 5.4%, to 20.148 million bags, from 21.307 million bags in 2024/25.

Overall, next week’s coffee price outlook will largely depend on developments in global supply and the US dollar’s movements. As rainfall forecasts in Brazil are confirmed and production is expected to increase in both major producing countries, downward pressure on prices will likely continue to impact the market in the coming weeks.