Global Coffee Supply Squeeze: Rain Shortage in Brazil Sends Price Quotes Climbing

Coffee futures are experiencing a notable upswing as mounting supply concerns ripple across key producing regions. March arabica contracts rose +1.05% to touch 1.5-week highs, while March robusta futures advanced +0.44%, signaling strengthened market conviction around tightening availability.

The Weather Factor: Brazil’s Rainfall Crisis

The fundamental story driving these price movements centers on inadequate precipitation in Brazil’s critical growing zones. According to Somar Meteorologia, Minas Gerais—Brazil’s largest arabica producer—recorded just 11.1 mm of rainfall during the week ending December 26, representing a mere 17% of the historical baseline. This shortfall has created genuine concerns about crop viability heading into the new season.

Brazil’s coffee output trajectory itself presents a mixed picture. While Conab, the country’s crop forecasting body, recently raised its 2025 production estimate by 2.4% to 56.54 million bags, the USDA’s Foreign Agriculture Service projects a -3.1% decline year-over-year to 63 million bags for 2025/26. These conflicting signals reflect the underlying uncertainty around weather impacts on yields.

Simultaneous Disruption in Southeast Asia

Weather isn’t the only supply shock pressuring markets. Indonesia faces a severe crisis: widespread flooding has damaged approximately one-third of northern Sumatra’s arabica farms, with potential to slash the nation’s coffee exports by as much as 15% during the 2025-26 season. Robusta crops remain comparatively less affected, though Indonesia ranks as the world’s third-largest robusta producer, making even partial damage significant.

Vietnam, the global robusta heavyweight, offers a contrasting supply picture. The country’s November coffee exports surged +39% year-over-year to 88,000 MT, while Jan-Nov shipments climbed +14.8% y/y to 1.398 MMT. Production forecasts suggest Vietnam’s 2025/26 output will reach 1.76 MMT (29.4 million bags)—a 4-year peak—marking a +6% year-over-year gain if weather remains favorable.

Inventory Signals and Price Mechanics

ICE-tracked inventory levels continue to support prices, though recent trends show volatility. Arabica inventories hit a 1.75-year low of 398,645 bags on November 20, though they recovered to 456,477 bags by last Wednesday. Robusta holdings similarly bottomed at a 1-year low of 4,012 lots in early December before rebounding to 4,278 lots.

US purchasing patterns underscore how market dynamics shift rapidly. American buyers dramatically reduced Brazilian coffee purchases during Trump’s tariff period—August through October saw US imports drop 52% year-over-year to 983,970 bags. Despite subsequent tariff reductions, US coffee inventories remain constrained, creating structural demand pressure.

The Global Supply Outlook

Looking ahead, the USDA projects world coffee production in 2025/26 will rise +2.0% to a record 178.848 million bags. However, this masks significant compositional shifts: arabica output faces a -4.7% decline to 95.515 million bags, while robusta climbs +10.9% to 83.333 million bags. More critically, global ending stocks are forecast to fall -5.4% to 20.148 million bags from 21.307 million bags in the previous year.

The International Coffee Organization reported that global coffee exports for the current marketing year slipped -0.3% year-over-year to 138.658 million bags—a sign that supply tightness persists despite rising production forecasts. These conflicting data points explain why arabica and robusta futures quotes remain vulnerable to directional shifts, balancing between structural supply concerns and abundant production projections.

The market remains caught between two competing narratives: weather-driven near-term disruptions supporting prices, and forecast abundance creating medium-term headwinds. For traders monitoring coffee derivatives, this tension makes price volatility the defining feature of the current cycle.