Weather Forecasts Drive Coffee Market Volatility: First Rain Quotes Shape Arabica and Robusta Divergence

Coffee futures markets displayed sharply divergent movements on Thursday, with first rain quotes revealing how localized weather forecasts ripple across global commodity markets. March arabica coffee settled 5.50 cents lower at 348.65, declining 1.57%, while March ICE robusta coffee gained 34 points to reach 4,182, up 0.82%. This contrasting price action underscores the critical role that precipitation patterns play in determining short-term market sentiment across the world’s two primary coffee varieties.

First Rain Signals in Brazil and Vietnam Create Market Divergence

The first rain quotes of the week reflected diverging weather outlooks across the globe’s coffee-producing regions. Arabica coffee faced downward pressure from forecasts predicting steady rainfall across Minas Gerais, Brazil’s dominant coffee-growing area, throughout the following week. Conversely, robusta coffee gained ground amid expectations of limited precipitation in Vietnam’s Central Highlands, the nation’s primary coffee-producing zone, over the subsequent 10 days. This weather-driven market split highlights how regional rain forecasts serve as the initial pricing signal for commodity traders monitoring crop health and yield prospects.

Brazil’s largest arabica coffee region, Minas Gerais, experienced below-average moisture levels, receiving only 33.9 mm of rain during the week ending January 16—representing just 53% of the historical average. This dry spell supports coffee prices, as insufficient rainfall threatens flowering and crop development. In contrast, Vietnam’s weather outlook improved robusta sentiment, as forecasters expected reduced showers that could mitigate oversupply concerns in Southeast Asia’s dominant producing region.

Inventory Recovery Signals Ample Global Coffee Supplies

Market dynamics face headwinds from rising global inventories despite recent production constraints. ICE-monitored arabica coffee inventories, which had plunged to a 1.75-year low of 398,645 bags on November 20, rebounded to 461,829 bags by January 14—a 2.5-month high that signals easing supply tightness. Similarly, ICE robusta inventories, which hit a 1-year low of 4,012 lots on December 10, recovered to 4,609 lots last Friday, marking a 1.75-month peak.

This inventory accumulation, combined with Brazil’s robust production outlook, creates bearish pressure on prices. On December 4, Conab, Brazil’s official crop forecasting agency, elevated its total 2025 coffee production estimate by 2.4% to 56.54 million bags, compared with the September projection of 55.20 million bags. The outlook for expanding global supplies remains a significant downside factor for market participants.

Production Forecasts Point to Record Global Supplies in 2025/26

The USDA’s Foreign Agriculture Service (FAS) projected that world coffee production in 2025/26 will climb by 2.0% year-over-year to a record 178.848 million bags. However, the composition of this growth diverges markedly between the two coffee types. Arabica production is expected to decline 4.7% to 95.515 million bags, reflecting structural challenges in traditional producing regions. Meanwhile, robusta output will surge 10.9% to 83.333 million bags, driven primarily by Vietnam’s expansion and Brazil’s modest robusta capacity.

Vietnam’s coffee production is projected to reach a 4-year high of 30.8 million bags in 2025/26, climbing 6.2% year-over-year. The Vietnam Coffee and Cocoa Association (Vicofa) stated on October 24 that Vietnam’s 2025/26 coffee output will be 10% higher than the previous crop year if weather conditions remain favorable, underscoring the region’s robust production trajectory. The International Coffee Organization (ICO) reinforced supply concerns, reporting that global coffee exports for the current marketing year (October-September) declined marginally by 0.3% year-over-year to 138.658 million bags.

Regional Export Trends Reflect Supply Dynamics

Brazil’s coffee export momentum has contracted sharply, providing a counterbalance to production strength. Cecafe reported that Brazil’s total December green coffee exports fell 18.4% to 2.86 million bags. Within this decline, arabica coffee exports dropped 10% year-over-year to 2.6 million bags, while robusta coffee shipments plummeted 61% year-over-year to just 222,147 bags. This export compression, despite larger supplies, suggests inventory buildups within Brazil and reduced international demand at current price levels.

In stark contrast, Vietnam is flooding global markets with robusta supplies. The country’s National Statistics Office reported on January 5 that Vietnam’s 2025 coffee exports jumped 17.5% year-over-year to 1.58 million metric tons, reflecting the nation’s position as the world’s largest robusta producer. This export surge, combined with production growth forecasts, positions Vietnam as a major supply driver for global robusta prices throughout 2025/26.

Market Outlook: Supply Abundance Tempers Price Upside

The FAS bi-annual assessment projects that 2025/26 ending stocks will fall 5.4% to 20.148 million bags from 21.307 million bags in 2024/25. While this modestly tighter inventory picture might initially appear supportive, the expected magnitude of global production growth and Vietnam’s accelerating export capacity suggest that supply will remain abundant relative to demand.

First rain quotes will continue to serve as critical market signals, as localized precipitation patterns in Minas Gerais and Vietnam’s Central Highlands directly influence near-term price discovery. However, the fundamental backdrop of record anticipated production in 2025/26, coupled with robust inventory recovery, suggests that weather-driven rallies may encounter meaningful resistance unless unexpected crop failures emerge in major producing regions.