Coffee Futures Slide Board Amid Brazil Weather Shift

Coffee futures markets took a step back on Friday as meteorological updates shifted sentiment. March arabica coffee declined -2.80 points (-0.78%), while March robusta coffee dropped -3 points (-0.07%), surrendering earlier session gains as precipitation forecasts for Brazil’s key growing regions improved over the coming week.

Weather Reversal: Rain Returns to Brazil

The turnaround reflects a dramatic shift from just days earlier. Last Thursday, arabica surged to a one-month peak following reports of inadequate rainfall across Brazil, the globe’s foremost arabica supplier. However, Somar Meteorologia’s latest assessment tells a different story. The data showed that Minas Gerais, representing Brazil’s largest arabica cultivation zone, recorded 26.5mm of precipitation in the week through January 9—merely 29% of typical seasonal levels. With rain now forecast to return, the near-term supply concerns that fueled the rally have faded.

Inventory Picture: Mixed Signals for the Market

Exchange-monitored stock levels present a nuanced backdrop. ICE arabica reserves hit a 1.75-year floor of 398,645 bags in mid-November before rebounding to 461,829 bags—a 2.5-month high—last Wednesday. Robusta stocks similarly showed volatility, falling to a one-year low of 4,012 lots in December before climbing back to 4,278 lots by late month.

These tightening inventory levels would typically support prices, but they’re being overshadowed by expanding global production expectations.

Production Outlook: Bears Take Control

Brazil’s crop agency Conab lifted its 2025 production estimate by 2.4%, projecting 56.54 million bags versus the prior September forecast of 55.20 million bags. The USDA Foreign Agriculture Service painted an even broader picture in its December forecast, predicting worldwide 2025/26 output at a record 178.848 million bags—up 2.0% annually—though this masks divergent regional trends.

Arabica production faces headwinds, projected to fall 4.7% to 95.515 million bags, while robusta climbs 10.9% to 83.333 million bags. For Brazil specifically, FAS estimates a 3.1% decline to 63 million bags in 2025/26.

Vietnam’s Export Surge: Robusta Pressure Builds

Vietnam’s coffee shipments tell a compelling story of rising robusta supplies dampening prices. The nation’s 2025 exports jumped 17.5% year-over-year to 1.58 million metric tons, underscoring its dominance as the world’s largest robusta producer. Production projections are equally bullish—output is expected to climb 6% annually to 1.76 million metric tons (29.4 million bags), marking a four-year high.

The Vietnam Coffee and Cocoa Association projected even more optimistic scenarios, suggesting 2025/26 production could run 10% above prior-year levels if favorable weather conditions persist.

The Global Picture: Supply Growth Outpaces Demand

While the International Coffee Organization noted that global exports for the current marketing year (October-September) dipped 0.3% year-over-year to 138.658 million bags, the medium-term narrative remains supply-focused. FAS forecasts year-end 2025/26 stocks will shrink 5.4% to 20.148 million bags from 21.307 million bags in 2024/25, but this modestly tighter scenario appears insufficient to arrest the downward price momentum.

The intersection of improving Brazilian weather, surging Vietnamese output, and record projected global production has created a bears’ market for coffee futures, explaining Friday’s slide board performance and the headwinds likely facing prices in the near term.