Vietnam's Coffee Crisis Sends Robusta Surging Amid Global Supply Squeeze

Robusta coffee surged +2.37% today, reaching a 2-week peak, while arabica gained +0.57%. The rally reflects converging supply pressures across the world’s major coffee-growing regions, with Vietnam and Brazil—where most of the world’s coffee supply originates—facing distinct headwinds.

Vietnam’s Flooding Creates Supply Shock

Vietnam, where robusta coffee is grown as the dominant crop, faces a critical harvesting disruption. Heavy rainfall in Dak Lak province, the country’s largest coffee-producing area, has delayed picking operations with forecasts showing more showers ahead that could compromise crop quality. This development has shocked the market because Vietnam is the world’s largest robusta producer, accounting for roughly 30% of global supply.

Yet paradoxically, Vietnam’s overall production remains robust. The nation’s January-October 2025 coffee exports climbed 13.4% year-over-year to 1.31 million metric tons. For 2025/26, output is projected to reach 1.76 million metric tons—a 4-year high—if weather cooperates. This creates a tension: near-term supply disruptions in harvest zones clash with record-high production forecasts.

Brazil Navigates Tariffs and Weather Trade-Offs

Brazil, where arabica coffee is predominantly grown, presents a more complex picture. The Trump administration’s 40% tariff on Brazilian imports has crushed US demand. From August through October, American purchases of Brazilian coffee plummeted 52% year-over-year to just 983,970 bags. This tariff wall has forced US importers to cancel Brazilian coffee contracts, tightening domestic supplies and shrinking ICE monitored inventories to 1.75-year lows.

However, Brazil itself is positioned for record production. StoneX forecasts Brazil will produce 70.7 million bags in 2026/27—a +29% jump—with arabica alone reaching 47.2 million bags. Meanwhile, Conab, Brazil’s official crop agency, slightly reduced its 2025 output estimate to 55.2 million bags, down 0.9% from previous forecasts. The disconnect reveals a market caught between bullish supply fundamentals and bearish demand destruction from tariffs.

Global Inventories Signal Tightening

Despite rising production forecasts, immediate supply metrics show constraint. ICE arabica inventories fell to 396,513 bags on Tuesday—a 1.75-year low. Robusta stocks dropped to 5,640 lots, marking a 4-month low. The International Coffee Organization reported that global exports for the current marketing year fell 0.3% year-over-year to 138.658 million bags, indicating that production gains are not flowing freely to markets.

The USDA projects world coffee production will increase 2.5% to 178.68 million bags in 2025/26, with robusta climbing 7.9% to 81.658 million bags and arabica declining 1.7% to 97.022 million bags. Despite these gains, inventory replenishment may lag demand, keeping prices supported.

What This Means for Traders

The coffee market is navigating conflicting narratives. Production is rising in both major regions, yet tariffs are disrupting trade flows, and weather is threatening near-term harvests. Robusta’s outperformance today signals that near-term supply anxiety—particularly the Vietnam flooding—is overriding longer-term abundance signals.

For traders watching where coffee is grown and how supply chains move, the key takeaway is clear: geopolitical trade barriers and localized weather shocks are trumping macro production trends. As long as inventories remain compressed and tariffs distort demand, price volatility will likely persist.