Global Coffee Market at Crossroads: Strong Brazilian Real Lifts Arabica Coffee While Vietnam's Supply Surge Pressures Robusta

The coffee futures market shows clear divergence today, with March arabica coffee rising +0.15 points (+0.04%) but January robusta coffee sliding -15 points (-0.34%), reflecting the complex interplay of regional supply dynamics and currency movements shaping the commodity’s outlook.

Brazilian Real Provides Temporary Support for Arabica Coffee

The strength in Brazilian real against the US dollar—hitting a 2-week high—is offering immediate support to arabica coffee prices today. A stronger local currency discourages Brazilian exporters from selling their coffee at current international price levels, naturally tightening available supply in global markets. This currency tailwind, however, operates against a backdrop of fundamental supply challenges that will ultimately determine price direction.

Supply Surge from Vietnam Weighs on Robusta Coffee Prices

Vietnam’s coffee sector is accelerating production at a pace that’s overwhelming robusta coffee prices. The Vietnam Coffee and Cocoa Association reported Tuesday that 10% of Vietnam’s robusta harvest has been completed, with forecasts indicating drier weather ahead will further accelerate the collection process. Vietnam’s January-October 2025 coffee exports jumped +13.4% year-over-year to 1.31 million metric tons, signaling robust market participation. More concerning for prices, Vietnam’s 2025/26 coffee production is projected to reach 1.76 million metric tons—a 4-year high—representing a +6% year-over-year increase. If weather remains favorable, the nation’s robusta coffee output could exceed last season by 10%.

Weather and Inventory Dynamics Create Mixed Picture for Arabica Coffee

Brazil’s largest arabica coffee-growing region, Minas Gerais, received only 20.4 mm of rain during the week ended November 28—just 39% of historical averages—a dry pattern that technically supports arabica coffee prices by constraining supply. Yet this support is being offset by inventory pressure. ICE arabica inventories collapsed to a 1.75-year low of 398,645 bags on November 20, while robusta warehouses hit an 11-month low of 4,115 lots today. The sharp inventory drawdown reflects a cascading effect from US tariffs: American buyers abandoned new Brazilian coffee contracts following tariff implementation, causing US purchases of Brazilian coffee (August-October period) to plunge 52% year-over-year to just 983,970 bags. Since Brazil supplies roughly one-third of America’s unroasted coffee, this trade disruption is fundamentally reshaping global inventory distribution.

Production Forecasts Suggest Abundant Coffee Supplies Ahead

Looking forward, the coffee market faces significant supply expansion. StoneX forecasted on November 19 that Brazil will produce 70.7 million bags in the 2026/27 marketing year—including 47.2 million bags of arabica, a +29% year-over-year increase. The USDA’s Foreign Agriculture Service projected in June that world coffee production for 2025/26 will climb +2.5% year-over-year to a record 178.68 million bags, though arabica production is expected to decline -1.7% to 97.022 million bags while robusta surges +7.9% to 81.658 million bags. These production increases signal that the current inventory tightness is temporary, ultimately weighing on medium-term arabica coffee price expectations.

Policy Shifts Add Complexity to Global Supply Outlook

The European Parliament’s approval last Wednesday of a 1-year delay to the deforestation regulation (EUDR) introduces additional uncertainty. By postponing enforcement, EU countries can continue importing agricultural products including coffee from regions experiencing deforestation in Africa, Indonesia, and South America. This regulatory reprieve effectively keeps coffee supplies more abundant than they otherwise would have been, adding downward pressure to prices. However, the International Coffee Organization reported that global coffee exports for the current marketing year fell -0.3% year-over-year to 138.658 million bags, suggesting that despite production increases, actual trade flows remain constrained.

The Bottom Line

Arabica coffee is navigating conflicting forces: the Brazilian real’s temporary strength and tight near-term inventories provide support, but upcoming production expansions and favorable weather in Vietnam suggest that supply growth will ultimately dominate price direction. Robusta coffee faces more direct pressure from Vietnam’s accelerating harvest and forecast production gains, creating divergent risk profiles between the two major coffee varieties.