Global Coffee Supply Surge Pressures Prices Lower

Coffee futures retreated sharply last Friday, with March arabica closing down 1.83% and January robusta sliding 2.00%, as market participants grew increasingly concerned about mounting global inventories. The robusta contract hit its lowest level in 2.5 months, signaling sustained bearish momentum in the coffee complex.

Supply Expansion Dominates Market Narrative

The recent downward pressure stems primarily from improved production outlooks across major growing regions. Brazil’s crop forecasting agency Conab boosted its 2025 production estimate to 56.54 million bags, reflecting a 2.4% increase from September projections. On a longer-term basis, USDA projections suggest Brazil will produce 65 million bags in 2025/26, up 0.5% year-over-year.

Vietnam’s coffee sector delivered even more striking growth metrics. The country’s November exports jumped 39% annually to 88,000 MT, while cumulative January-November shipments climbed 14.8% to 1.398 million MT. Looking ahead, Vietnamese production is forecast to reach 31 million bags in 2025/26, marking a 4-year high and representing 6.9% growth compared to the prior year. The Vietnam Coffee and Cocoa Association projects potential output gains of 10% if favorable weather conditions persist.

Globally, USDA forecasts indicate world coffee production will climb 2.5% to a record 178.68 million bags, with robusta output expanding 7.9% to 81.658 million bags despite arabica declining 1.7% to 97.022 million bags.

Mixed Signals from Inventory and Trade Flows

Inventory data presents a nuanced picture. ICE arabica holdings fell to a 1.75-year low of 398,645 bags in mid-November before recovering to 426,523 bags last Friday. Robusta inventories similarly dropped to an 11.5-month low of 4,012 lots, providing some technical support. Conversely, global coffee exports for the current marketing year fell 0.3% annually to 138.658 million bags, suggesting tightness in near-term supply chains.

US purchasing patterns shifted significantly following tariff adjustments. American buyers’ Brazilian coffee purchases totaled 983,970 bags from August through October, down 52% from year-ago levels when elevated tariffs dampened demand. This reduction left US coffee inventories relatively constrained despite recent tariff easements.

Brazil’s November green coffee exports declined 27% annually to 3.3 million bags, offering temporary support to arabica prices.

Weather and Regulatory Considerations

Precipitation deficiency in Brazil’s primary arabica region presents a bullish factor. Minas Gerais received only 11 mm of rain during the week ending December 5, representing just 17% of the historical average. However, this weather stress is being counterbalanced by regulatory developments: the European Parliament approved a one-year delay to the deforestation law in late November, allowing continued imports into the EU from regions experiencing forest loss. This regulatory postponement could prolong supply availability, particularly from African and Indonesian sources.

Looking forward, global coffee ending stocks are projected to expand 4.9% to 22.819 million bags in 2025/26, reflecting the production growth trajectory across major origins.