Brazil's Weather Reversal Weighs on Coffee Futures as Supply Outlook Brightens

Arabica and robusta coffee contracts faced substantial selling pressure this week, extending declines from the previous session. March arabica futures dropped 2.34%, while January ICE robusta coffee retreated 2.13%, with arabica sliding to its lowest point in three weeks and robusta testing 4-month lows. The primary headwind stems from meteorological developments in Brazil’s primary growing regions, where forecasters indicated that intense and consistent moisture is anticipated throughout the week.

Weather Dynamics Shift Market Sentiment

Brazil’s coffee belt, particularly Minas Gerais—the nation’s largest arabica-producing region—experienced substantial precipitation recently. According to Somar Meteorologia, the area received 79.8 millimeters of rain during the week ending December 12, representing 155% of the historical norm for that period. Climatempo’s updated forecast suggested that significant moisture patterns would persist, fundamentally altering the narrative around crop development concerns that had previously supported prices.

This weather transformation has become bearish for market participants who were positioned for supply constraints. The improved rainfall trajectory suggests better conditions for bean maturation and yield potential, inverting earlier pessimism about insufficient precipitation during critical growing phases.

Production Expansion Pressures Both Varieties

Brazil’s coffee establishment has substantially increased its 2025 output projections. Conab, the government’s crop forecasting authority, raised its total production estimate by 2.4% in early December to 56.54 million bags from September’s 55.20 million bags estimate. This upward revision, combined with reassuring weather patterns, has created a bearish bias across trading floors.

Robusta coffee faces additional headwinds from Vietnam’s export momentum. Vietnam’s National Statistics Office reported that November coffee shipments surged 39% year-over-year to 88,000 metric tons, with January-through-November cumulative exports climbing 14.8% year-over-year to 1.398 million metric tons. Vietnam’s 2025/26 production is projected at 1.76 million metric tons (29.4 million bags), representing a 6% year-over-year increase and marking a 4-year high.

Support Factors Provide Limited Relief

Despite the dominant bearish landscape, select data points offered modest price support. Brazil’s green coffee export figures for November fell 27% year-over-year to 3.3 million bags, according to exporter group Cecafe. This contraction reflects earlier tariff-related disruptions to US purchasing patterns, as American buyers curtailed Brazilian coffee acquisitions during the period when elevated US tariffs were in effect, with August-through-October purchases down 52% compared to the prior year.

ICE-monitored warehouse stocks presented mixed signals. Arabica inventories had reached an 11-month low of 398,645 bags on November 20 before recovering to 426,523 bags by December 5. Robusta stocks fell to an 11.5-month low of 4,012 lots mid-December, suggesting some tightness in immediate availability despite ample production growth.

Global Supply Landscape Remains Supportive of Prices

The International Coffee Organization reported that global exports for the current marketing year (October-September) edged down 0.3% year-over-year to 138.658 million bags. However, longer-term supply projections point to abundance. The USDA’s Foreign Agriculture Service projects 2025/26 world production climbing 2.5% to a record 178.68 million bags, with arabica declining 1.7% to 97.022 million bags and robusta expanding 7.9% to 81.658 million bags.

Ending stocks for 2025/26 are forecast to rise 4.9% to 22.819 million bags from 21.752 million bags in the prior year, reinforcing the backdrop of ample supplies ahead. This inventory accumulation trajectory stands as a structural weight on prices in the quarters ahead.