Coffee Quote Signals Shift as Crop Forecasts Point to Rising Global Supply

Coffee futures experienced notable weakness this week, with March arabica contracts retreating 0.66% and January robusta contracts mirroring similar losses. The broader trend over recent weeks shows steeper declines, pushing coffee to 4-month lows as multiple supply-side factors overwhelmed the market.

Weather Tailwinds in Brazil Reshape the Coffee Quote Outlook

Brazil’s coffee-growing regions received substantial rainfall, with Minas Gerais—the nation’s largest arabica producer—recording 79.8 mm during the week ending December 12, surpassing the 155% historical average. Meteorological agencies flagged persistent, heavy rains expected to continue through the week, significantly alleviating previous drought concerns that had supported higher valuations.

The currency backdrop amplified bearish pressure on the coffee quote. Brazil’s real weakened to a 4.5-month low, a development that typically encourages domestic producers to accelerate export volumes, further flooding international markets with supply.

Production Surge Dominates Market Narrative

Brazil’s crop forecasting agency revised upward its 2025 total production estimate to 56.54 million bags, a 2.4% increase from the September projection of 55.20 million bags. This production outlook combines with Vietnam’s robust export performance—November shipments surged 39% year-over-year to 88,000 MT, while January-to-November cumulative exports rose 14.8% to 1.398 million MT.

Global supply expansion extends further ahead. The USDA projects world production will climb 2.5% to a record 178.68 million bags in 2025/26, driven primarily by robusta output rising 7.9% while arabica dips 1.7%. Vietnam alone is forecast to deliver 31 million bags, up 6.9% and marking a 4-year peak. Vicofa indicated Vietnam’s output could spike 10% higher if weather remains favorable, positioning the world’s largest robusta producer for exceptional availability.

Inventory Dynamics Create Mixed Signals for the Coffee Quote

ICE-monitored arabica stocks fell to 1.75-year lows of 398,645 bags on November 20 before recovering to 432,672 bags by Thursday. Robusta inventories similarly dipped to 11.5-month lows of 4,012 lots, though these draws lack the magnitude to counter rising supply expectations.

Global coffee exports during the current marketing year (October-September) actually declined 0.3% year-over-year to 138.658 million bags, per International Coffee Organization data, suggesting demand absorption remains steady. However, forward-looking inventory positions paint a different picture—ending stocks for 2025/26 are projected to expand 4.9% to 22.819 million bags from 21.752 million in 2024/25.

Trade Dynamics Add Complexity

US importers reduced Brazilian coffee purchases by 52% during August-October 2024 when tariffs pressured margins, declining to 983,970 bags. While tariff conditions have since eased, American coffee inventory levels remain constrained, suggesting pent-up demand could eventually provide price support. Brazil’s November green coffee exports fell 27% year-over-year to 3.3 million bags according to exporter group Cecafe, offering temporary relief to the coffee quote.

The interplay between abundant supplies, supportive inventory trends in certain segments, and currency movements leaves the coffee quote positioned between competing forces—production optimism and upcoming demand absorption. The market’s direction hinges on whether global coffee supply expansion can be absorbed at current valuations or whether inventory builds ultimately force reassessment.