Global Coffee Supply Tightness Supports Arabica Rally Despite Robusta Headwinds

Mixed Coffee Market Signals Diverging Supply Dynamics

The arabica coffee market rallied on Thursday, with March contracts gaining +3.90 points (+1.05%), while January robusta coffee dipped -15 points (-0.26%). This divergence reflects fundamentally different supply outlooks for the world’s two primary coffee species. For arabica, momentum has carried over from Wednesday’s Cecafe export data, which revealed a sharp contraction in Brazilian shipments. November green coffee exports from Brazil declined 27% year-over-year, totaling just 3.3 million bags—a significant shortfall that has become a key price support.

Brazil’s Weather and Production Outlook Create Price Floors

Brazilian drought conditions continue bolstering arabica values. Minas Gerais, the nation’s premier arabica-growing region, experienced just 11 mm of precipitation during the week ending December 5—a mere 17% of the historical rainfall average. This moisture deficit threatens yield potential and provides underlying support for futures prices. Conab, Brazil’s official crop forecasting agency, recently upgraded its 2025 coffee production estimate by 2.4% to 56.54 million bags, compared to September’s forecast of 55.20 million bags. However, regulatory headwinds emerged when the European Parliament delayed EUDR (European Union Deforestation Regulation) implementation by one year on November 26. This postponement permits continued agricultural imports from deforestation-prone regions across Africa, Indonesia, and South America, potentially alleviating near-term supply pressures from policy-driven restrictions.

Inventory Levels Tell a Mixed Story

Physical stock situations are sending conflicting signals. ICE-monitored arabica inventories plummeted to a 1.75-year low of 398,645 bags on November 20, though they rebounded slightly to 426,523 bags last Friday—still historically lean. Conversely, robusta stockpiles fell to an 11.5-month nadir of 4,012 lots by Wednesday, reflecting tighter available supply. The U.S. market has faced particular tightness following Trump administration tariffs that suppressed American purchases of Brazilian coffee. August-through-October imports dropped 52% compared to the prior year to 983,970 bags, and despite recent tariff removal, U.S. coffee inventory levels remain constrained.

Vietnamese Output Surge Pressures Robusta Prices

Robusta coffee continues laboring under supply abundance concerns. Vietnam’s November coffee exports surged 39% year-over-year to 88,000 MT, with January-through-November cumulative shipments rising 14.8% to 1.398 MMT. Looking ahead, Vietnam’s 2025/26 production is projected to climb 6% year-over-year to 1.76 MMT (29.4 million bags)—a four-year peak. The Vietnam Coffee and Cocoa Association indicated that output could reach 10% above the prior crop year if weather remains cooperative. As the globe’s leading robusta producer, Vietnam’s expanding harvest oversupply weighs directly on futures valuations.

Global Production and Inventory Projections Shape Medium-Term Outlook

The International Coffee Organization reported November 7 that global coffee exports for the current marketing year (October-September) contracted 0.3% year-over-year to 138.658 million bags, suggesting tightening flows. The USDA’s Foreign Agriculture Service projects 2025/26 world coffee production will climb 2.5% to a record 178.68 million bags. This breaks down as a 1.7% arabica decline to 97.022 million bags offset by a 7.9% robusta increase to 81.658 million bags. Brazil’s production is forecast to rise 0.5% to 65 million bags, while Vietnam’s output is expected to jump 6.9% to 31 million bags. Ending stocks are projected to accumulate by 4.9% to 22.819 million bags from 21.752 million bags in 2024/25, suggesting longer-term inventory builds despite near-term tightness.

The coffee complex faces competing pressures: arabica benefits from Brazilian export weakness and sub-average rainfall, while robusta grapples with Vietnamese production strength and global supply increases on the horizon.