Drought Conditions in Brazil Keep Coffee Prices Elevated Despite Global Supply Glut

Arabica and robusta coffee futures are gaining ground today, with March arabica (KCH26) rising 1.58% and January robusta (RMF26) climbing 1.04%. The recovery comes as below-normal rainfall in Brazil’s key growing regions supports price sentiment, though abundant global production forecasts continue to weigh on the market.

Brazil’s Dry Spell Shifts the Balance

Rain has been scarce in Brazil’s Minas Gerais region, a critical arabica producing area that received just 11 mm of precipitation during the week ending December 5—barely 17% of historical norms. This drought-like pattern is providing a floor under prices, especially after Monday’s sharp selloff pushed arabica to a 2-week low and robusta to a 2.25-month low.

However, dryness alone isn’t enough to overcome the supply backdrop. Brazil’s crop agency Conab recently lifted its 2025 production forecast by 2.4% to 56.54 million bags, signaling robust harvests despite the recent weather stress.

Supply Surge vs. Tight Inventory: A Market Divided

The coffee market faces conflicting signals. Vietnam’s coffee exports jumped 39% year-over-year in November and are up 14.8% for the January-through-November period, while the country’s 2025/26 output is expected to climb 6% to a 4-year high of 1.76 million metric tons. Globally, the USDA projects world production will hit a record 178.68 million bags in 2025/26, with robusta output rising 7.9%.

Yet inventory conditions offer some price support. ICE arabica inventories have pulled back from recent lows, though robusta stocks just hit an 11.5-month low. Meanwhile, US buyers have been pulling back on Brazilian coffee purchases—shipments fell 52% year-over-year from August through October when tariffs were in effect—keeping American coffee supplies tight.

The Global Picture: Production Gains Offset Inventory Tightness

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 while exports are slowing, production capacity continues to expand. Ending stocks are forecast to rise 4.9% to 22.819 million bags by the end of 2025/26.

In this environment, coffee prices are caught between the supporting effects of below-normal rainfall in Brazil and historically tight near-term inventories, versus the headwinds from record global production and Vietnam’s rising output. The tug-of-war between these forces will likely define coffee’s near-term direction.