Coffee Prices Rally on Brazilian Real Strength and Vietnam Robusta Coffee Supply Dynamics

Recent trading sessions witnessed substantial gains in both arabica and robusta coffee futures, with March arabica coffee climbing +11.00 points (+3.09%) and March ICE robusta coffee advancing +78 points (+1.86%). According to Barchart’s commodity analysis, coffee prices posted a two-week high, primarily driven by strength in the Brazilian real, which rallied to a 20-month high and discouraged export sales among Brazil’s coffee producers. This movement underscores the complex interplay between currency movements and global agricultural commodity markets that shapes pricing dynamics.

Barchart Analysis: Currency Strength Drives Arabica Higher

The rally in the Brazilian real to a 20-month peak created a critical headwind for Brazilian coffee exporters. When the real strengthens against the US dollar, Brazilian coffee becomes more expensive for international buyers, naturally constraining export volumes and supporting prices through supply restrictions rather than demand strength. This currency-driven mechanism explains the arabica coffee surge despite other bearish factors present in the market.

Brazil’s December green coffee export data validates the export slowdown thesis. According to Cecafe, Brazil’s total December green coffee exports contracted 18.4% to 2.86 million bags, with arabica exports declining 10% year-over-year to 2.6 million bags. The robusta coffee export picture proved even more severe, plummeting 61% year-over-year to just 222,147 bags. These contracting export flows, whether currency-driven or weather-related, mechanically support prices by reducing available supplies in the international market.

Weather challenges in Brazil further reinforce the bullish case for coffee prices. Somar Meteorologia reported that Minas Gerais, Brazil’s largest arabica-growing region, received only 33.9 mm of rainfall during the week ended January 16—representing just 53% of the historical average. Below-average precipitation in the world’s largest arabica producer raises concerns about future crop health and yield, constructively supporting near-term prices through weather-related supply uncertainty.

Brazilian Production Squeeze vs. Vietnam Robusta Coffee Surge

A fundamental tension now characterizes the global coffee market: Brazil faces production headwinds while Vietnam accelerates robusta coffee output. Brazil’s crop forecasting agency, Conab, projected 2025 total coffee production at 56.54 million bags in December—a 2.4% increase from the September estimate of 55.20 million bags. However, USDA’s Foreign Agriculture Service (FAS) offered a more cautious view, forecasting Brazil’s 2025/26 coffee production will decline 3.1% year-over-year to 63 million bags, suggesting production challenges may intensify.

In sharp contrast, Vietnam—the world’s largest robusta coffee producer—is experiencing a production surge. Vietnam’s National Statistics Office reported that 2025 coffee exports jumped 17.5% year-over-year to 1.58 million metric tons. Production is projected to climb 6% year-over-year to 1.76 million metric tons (29.4 million bags), reaching a four-year high. The Vietnam Coffee and Cocoa Association (Vicofa) provided even more optimistic guidance in October, suggesting 2025/26 coffee output will be 10% higher than the previous crop year if favorable weather persists.

The divergence between Brazilian supply tightening and Vietnamese robusta coffee expansion creates a mixed supply backdrop. While Brazilian constraints support arabica prices, Vietnamese abundance pressures robusta coffee prices downward, explaining why arabica futures outperformed robusta coffee contracts on the recent trading day.

Global Coffee Inventories Recover: Mixed Signals for Prices

ICE-monitored inventory movements present a complicated picture for price direction. ICE arabica inventories fell to a 1.75-year low of 398,645 bags on November 20 but recovered to a 2.5-month high of 461,829 bags by January 14. Similarly, robusta coffee warehouse stocks plunged to a 1-year low of 4,012 lots on December 10 but rebounded to a 1.75-month high of 4,609 lots by late January.

This inventory recovery carries dual implications. Rising stocks can signal easing supply tightness, typically exerting downward pressure on prices. However, recovery from multi-month lows to more normalized levels may reflect market-clearing price action rather than oversupply conditions. The moderate inventory bounce suggests tightness may be gradually allevating but structural scarcity hasn’t fully reversed.

USDA Projections: World Coffee Supply Outlook Through 2025/26

The USDA’s Foreign Agriculture Service provided a comprehensive outlook in December. Global coffee production in 2025/26 is projected to increase 2.0% year-over-year to a record 178.848 million bags. However, this masks a critical divergence: arabica production will decline 4.7% to 95.515 million bags while robusta coffee production surges 10.9% to 83.333 million bags.

The supply expansion appears concentrated in robusta coffee, where Vietnam dominates. FAS forecasted Vietnam’s 2025/26 robusta coffee output will rise 6.2% year-over-year to a four-year high of 30.8 million bags—dramatically outpacing demand growth and potentially capping upside for robusta coffee prices.

Critically, FAS projects 2025/26 ending coffee inventories will fall 5.4% to 20.148 million bags from 21.307 million bags in 2024/25, suggesting mild global tightness ahead. The International Coffee Organization (ICO) reported global coffee exports for the current marketing year (October-September) fell 0.3% year-over-year to 138.658 million bags, indicating export flows are stabilizing after earlier disruptions.

The fundamental outlook remains balanced: Brazilian constraints support arabica prices while Vietnamese production expansion pressures robusta coffee lower. Arabica traders should monitor Brazilian weather and currency movements, while robusta coffee participants face headwinds from abundant Vietnamese supplies competing for market share globally.