Global Coffee Supply Surge Crushes Arabica Prices to Fresh 4-Month Lows

The arabica coffee market faced significant headwinds on Friday as improved harvest outlooks from major producers triggered a sharp sell-off. March arabica futures dropped -4.45 points (-1.29%), plunging to their lowest level in four months, while January robusta coffee edged up slightly by +4 points (+0.11%), reflecting divergent market pressures on the two varieties.

Abundant Rainfall Eases Production Concerns in Brazil

The primary culprit behind arabica’s weakness is Brazil’s dramatically improved weather outlook. Climatempo forecasted intense and persistent rainfall across Brazil’s coffee-growing regions this week, directly alleviating prior drought concerns. The numbers tell a compelling story: Minas Gerais, Brazil’s largest arabica-producing state, received 79.8 mm of rain during the week ending December 12—representing 155% of the historical average.

This weather reversal prompted Brazil’s crop forecasting agency, Conab, to raise its 2025 coffee production estimate by 2.4% to 56.54 million bags in early December, up from a September projection of 55.20 million bags. The upgraded supply outlook has become the dominant price driver, as traders repriced arabica lower to reflect ample global supplies on the horizon.

Vietnam’s Surging Production Pressures Robusta Markets

While Brazil dominates arabica production, Vietnam’s robusta coffee boom is reshaping global coffee dynamics. Vietnam’s National Statistics Office reported that November coffee exports surged +39% year-over-year to 88,000 metric tons, with cumulative January-November exports climbing +14.8% year-over-year to 1.398 million metric tons.

Looking ahead, Vietnam’s 2025/26 coffee production is projected to increase +6% year-over-year to 1.76 million metric tons (equivalent to 29.8 million bags)—a four-year production high. The Vietnam Coffee and Cocoa Association suggested output could climb 10% higher than the previous crop if weather remains favorable, solidifying Vietnam’s position as the world’s largest robusta producer and weighing on robusta coffee prices through elevated supply expectations.

Global Production Forecasts Signal Record Supplies Ahead

The U.S. Department of Agriculture’s Foreign Agriculture Service painted a picture of unprecedented global coffee supplies. For the 2025/26 marketing year, world coffee production is projected to reach a record 178.848 million bags—a +2.0% year-over-year increase. This aggregate masks a critical split: arabica production is forecast to decline -4.7% year-over-year to 95.515 million bags, while robusta production will surge +10.9% year-over-year to 83.333 million bags.

At the country level, the FAS expects Brazil’s 2025/26 output to decline -3.1% year-over-year to 63 million bags, a reversal from earlier supply concerns. Conversely, Vietnam’s production is projected to jump 6.2% year-over-year to 30.8 million bags. These supply projections explain why arabica coffee has faced such intense selling pressure despite some offsetting positive factors.

Mixed Signals from Export Data and Inventory Trends

Not all news has been bearish for arabica prices. Brazil’s green coffee exports fell sharply -27% year-over-year in November to just 3.3 million bags, suggesting near-term tightness in the supply chain. The International Coffee Organization reported that global coffee exports for the current marketing year (October-September) declined -0.3% year-over-year to 138.658 million bags, hinting at near-term supply constraints.

ICE-monitored arabica coffee inventories present a nuanced picture. After falling to a 1.75-year low of 398,645 bags on November 20, arabica stocks recovered to a 7-week high of 439,257 bags by Friday’s close. ICE robusta inventories remain tighter, having fallen to an 11.5-month low of 4,012 lots last Wednesday. However, the FAS projects 2025/26 ending stocks will contract -5.4% year-over-year to 20.148 million bags from 21.307 million bags in 2024/25, suggesting modest inventory relief ahead.

U.S. Tariff Relief May Provide Modest Demand Support

A structural demand headwind for arabica has finally eased. During the period when President Trump’s tariffs were in effect (August-October), U.S. purchases of Brazilian coffee plummeted -52% from the prior-year period to just 983,970 bags as American buyers avoided Brazilian coffee at elevated tariff-inclusive prices. With those tariffs now eased, U.S. coffee demand may gradually recover, though domestic U.S. coffee inventories remain historically tight, limiting aggressive restocking.

The divergence between arabica and robusta coffee prices reflects fundamental differences in their supply trajectories. While arabica faces structural headwinds from improved Brazilian production and global oversupply projections, robusta benefits from robust demand dynamics offset partially by Vietnam’s surging supplies. For arabica coffee, the near-term trajectory likely remains under pressure until global supply-demand equilibrium becomes apparent.