Global Coffee Supply Pressures Push March Futures Higher Amid Weather Threats

Coffee futures markets reflected growing concerns about supply disruptions this week, with coffee price gains driven by mounting production risks across major growing regions. March arabica contracts settled +0.54% higher at their 1.5-week peak, while March robusta futures advanced +0.67%, closing at elevated levels as weather and flooding threats intensify scrutiny on global inventories.

Brazil’s Dry Spell Signals Crop Vulnerability

The primary pressure on coffee prices emerged from Brazil’s Minas Gerais region, historically the world’s largest arabica growing area. Meteorological data revealed concerning precipitation deficits during the week ending December 26, when the region received only 11.1 mm of rainfall—representing just 17% of historical seasonal averages. This moisture shortage has rekindled concerns about flowering and pod development in the crucial growing window.

Yet supply dynamics present contradictory signals. Brazil’s crop forecasting agency Conab raised its 2025 production estimate by 2.4% to 56.54 million bags in early December, suggesting resilience despite near-term weather worries. However, the USDA’s Foreign Agriculture Service painted a different picture for the 2025/26 season, projecting Brazil’s output will decline 3.1% year-over-year to 63 million bags—a notable downward revision that contrasts sharply with the domestic optimism.

Indonesia’s Flooding Crisis Threatens Regional Output

Beyond Brazil, Indonesia’s coffee sector faces acute flooding challenges. Northern Sumatra’s arabica farms, representing roughly one-third of the country’s arabica capacity, have suffered significant damage in recent weeks. Industry leaders warn that coffee exports could contract by as much as 15% during the 2025-26 marketing year due to these disruptions. As the world’s third-largest robusta producer, Indonesia’s supply squeeze amplifies robusta coffee price support, even as its arabica damage remains more severe.

Vietnam’s Robust Production Outlook Pressures Robusta Values

Counterbalancing supply concerns, Vietnam’s coffee output trajectory remains expansionary. The National Statistics Office reported November exports jumped 39% year-over-year to 88,000 metric tons, with January through November shipments rising 14.8% to 1.398 million metric tons. Looking ahead, Vietnam’s 2025/26 production is projected to climb 6% year-over-year to 1.76 million metric tons (29.4 million bags)—a four-year high that positions the world’s largest robusta producer for elevated market availability.

The Vietnam Coffee and Cocoa Association indicated that output could reach 10% above prior-year levels if favorable weather conditions persist, suggesting upside potential that could temper robusta coffee price momentum despite supply tightness elsewhere.

Inventory Dynamics Show Mixed Signals

ICE warehouse stocks present a nuanced picture of tightness. Arabica inventories fell to a 1.75-year low of 398,645 bags on November 20 before recovering to a 2-month high of 456,477 bags by late December, suggesting some seasonal restocking. Robusta inventories similarly bottomed at a 1-year low of 4,012 lots on December 10, then bounced to a 4-week peak of 4,278 lots by mid-week.

The inventory rebound occurred even as US coffee purchases shifted materially. American buyers had shunned Brazilian coffee during President Trump’s tariff regime, with imports from August through October plunging 52% year-over-year to 983,970 bags compared to the prior-year period. Although tariffs were subsequently reduced, US inventories remain historically constrained, limiting domestic buffer stock as global supplies tighten.

Global Production Forecasts Signal Record Output Amid Price Headwinds

The International Coffee Organization reported on November 7 that global coffee exports for the current marketing year declined marginally by 0.3% year-over-year to 138.658 million bags, indicating modest export pressures despite production abundance elsewhere.

The USDA’s Foreign Agriculture Service delivered a comprehensive 2025/26 outlook on December 18, projecting world coffee production will increase 2.0% year-over-year to a record 178.848 million bags. However, the composition reveals structural shifts: arabica output is forecast to contract 4.7% to 95.515 million bags, while robusta surges 10.9% to 83.333 million bags. This divergence explains why arabica coffee prices find support from production declines, while robusta faces headwinds from Vietnamese and Indonesian abundance.

Ending stocks for 2025/26 are projected to decline 5.4% to 20.148 million bags from 21.307 million bags in 2024/25, suggesting a tighter global balance sheet that could sustain support for coffee prices if supply shocks materialize as threatened.

Market Takeaway

Coffee futures gains this week reflected a complex calculus: genuine production risks in Brazil and Indonesia supported prices, while Vietnam’s robust robusta expansion and record global production forecasts provided countervailing pressure. The divergence between tight arabica availability and abundant robusta supply will likely remain a key driver of coffee price dynamics throughout the 2025/26 marketing year.