Coffee Prices Surge as Brazilian Currency Reaches 20-Month Peak

March arabica coffee futures closed sharply higher on Tuesday, gaining 11.00 points (+3.09%), while March ICE robusta coffee futures jumped 78 points (+1.86%). The strength in the Brazilian real, which rallied to a 20-month high, proved to be the primary driver behind the coffee prices surge, with arabica marking a 2-week high. This currency movement discouraged Brazilian coffee producers from accelerating their export sales, tightening near-term supply.

March Futures Post Strongest Gains in Two Weeks

The arabica contract’s jump to a 2-week high reflects growing market recognition of supply constraints from Brazil, the world’s largest arabica producer. Robusta prices, while posting more modest gains, benefited from parallel supportive factors affecting the broader coffee market. The dual advance suggests that coffee prices are responding to multiple converging market pressures rather than isolated catalysts.

Brazil’s Weakening Export Activity Supports Coffee Prices

Brazil’s total December green coffee exports fell sharply by 18.4% to 2.86 million bags, according to Cecafe’s recent report. Within this decline, arabica coffee exports decreased 10% year-over-year to 2.6 million bags, while robusta exports plummeted 61% year-over-year to just 222,147 bags. The Brazilian real’s strength at a 20-month high is directly suppressing export competitiveness, a dynamic that can provide near-term support for coffee prices by reducing global supply flows.

Weather conditions in Brazil’s key production zones remain unfavorable. Somar Meteorologia reported that Minas Gerais, Brazil’s largest arabica-growing region, received only 33.9 mm of rain during the week ended January 16—approximately 53% of the historical average. Below-average rainfall patterns bolster the case for tighter coffee supplies ahead.

Inventory Recovery Signals Mixed Market Dynamics

The recent movement in ICE-monitored inventories presents a nuanced picture. Arabica inventories, which fell to a 1.75-year low of 398,645 bags on November 20, recovered to a 2.5-month high of 461,829 bags by January 14. Similarly, robusta inventories bottomed at 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. While this inventory recovery suggests some stabilization in available supplies, levels remain manageable relative to recent history.

Production Outlook: Brazil’s Expansion vs. Global Growth

Brazil’s 2025 coffee production is projected to expand substantially. Conab, Brazil’s official crop forecasting agency, raised its full-year estimate by 2.4% to 56.54 million bags in December, up from a September projection of 55.20 million bags. However, the USDA’s Foreign Agriculture Service (FAS) provides a more cautious 2025-26 outlook, forecasting that Brazil’s production will decline by 3.1% year-over-year to 63 million bags—suggesting the longer-term supply picture may tighten.

Vietnam, the world’s largest robusta producer, presents a more bullish supply scenario. The country’s 2025 coffee exports jumped 17.5% year-over-year to 1.58 MMT, according to Vietnam’s National Statistics Office. Vietnam’s 2025-26 production is projected to climb 6% to 1.76 MMT (29.4 million bags), marking a 4-year high. The Vietnam Coffee and Cocoa Association indicated that output could be 10% higher than the previous crop year if favorable weather conditions persist. Such robust Vietnamese supplies present a headwind against rising coffee prices, particularly for robusta.

Global Market Picture: Tight Exports, Record Production Ahead

The International Coffee Organization (ICO) reported that global coffee exports for the current marketing year (October-September) fell 0.3% year-over-year to 138.658 million bags, signaling constrained supply flows internationally. However, this tightness appears temporary. The USDA FAS projects world coffee production in 2025-26 will increase 2.0% year-over-year to a record 178.848 million bags, with arabica production declining 4.7% to 95.515 million bags while robusta surges 10.9% to 83.333 million bags.

The FAS forecast suggests 2025-26 ending stocks will compress by 5.4% to 20.148 million bags from 21.307 million bags in 2024-25. This modest drawdown, combined with surging robusta production, indicates that while coffee prices may find support from near-term Brazilian export weakness and currency strength, longer-term pressure could emerge as global supplies normalize and Vietnamese production accelerates.