Arabica Coffee Markets Navigate Brazilian Currency Strength and Global Supply Shifts

The arabica coffee market experienced notable price movements on Thursday, with futures rebounding from early weakness to close modestly higher. March arabica contracts closed up 0.06%, while March robusta futures declined 1.28%. The recovery in arabica came as the Brazilian real strengthened to a 2.25-month high against the dollar, triggering short covering activity. A stronger real makes Brazilian coffee exports less attractive from a currency perspective, which paradoxically supported prices as traders adjusted positions.

Early losses in arabica coffee stemmed from weather forecasts predicting rainfall across Brazil’s primary growing regions. The Weather Channel reported potential daily showers throughout the week in Minas Gerais, the nation’s largest arabica producing area. Additionally, increasing inventories at ICE warehouses weighed on sentiment, with arabica stocks climbing to a 2.5-month high of 461,829 bags last week from a 1.75-year low of 398,645 bags recorded in November.

Supply Dynamics Supporting Arabica Values

Brazilian arabica exports face headwinds, which provides some price support despite global oversupply concerns. According to Cecafe, Brazil’s December green coffee exports fell 18.4%, with arabica shipments down 10% year-over-year to 2.6 million bags. Robusta exports experienced even steeper declines of 61% year-over-year.

Rainfall patterns in key growing regions remain a critical variable. Somar Meteorologia reported that Minas Gerais received 33.9 mm of rain during the week ending January 16, representing only 53% of historical averages. This below-normal precipitation supports arabica coffee values by threatening potential future production.

The International Coffee Organization confirmed tighter near-term supply dynamics, reporting that global coffee exports for the current marketing year fell 0.3% year-over-year to 138.658 million bags. However, this near-term strength faces pressure from rising supplies anticipated later.

Production Outlook and Robusta Competition

Long-term arabica coffee supply faces headwinds from Brazil’s revised production estimates. Conab, Brazil’s crop forecasting agency, raised its 2025 total coffee production estimate by 2.4% to 56.54 million bags in December. However, the USDA’s Foreign Agriculture Service projects that Brazil’s 2025/26 production will actually decline 3.1% year-over-year to 63 million bags, suggesting inventory drawdowns ahead.

Global robusta production surges present competitive pressure. Vietnam’s coffee exports jumped 17.5% year-over-year to 1.58 million metric tons in 2025, with production projected to climb 6% to 1.76 million metric tons for 2025/26. The Vietnam Coffee and Cocoa Association forecasted that output could rise 10% higher than the previous crop year if weather conditions remain favorable.

Market Implications and 2025/26 Outlook

While arabica coffee faces mixed signals, the broader coffee market shows structural shifts. The USDA projects that world coffee production in 2025/26 will increase 2.0% year-over-year to a record 178.848 million bags. Arabica production is expected to decline 4.7% to 95.515 million bags, while robusta surges 10.9% to 83.333 million bags.

Ending stocks for the 2025/26 marketing year are forecast to fall 5.4% to 20.148 million bags from 21.307 million bags in 2024/25. This modest inventory reduction suggests that arabica coffee prices will continue balancing production challenges in key regions against expanding global supplies from emerging competitors. The market remains sensitive to weather developments in Brazil and production trends in Southeast Asia.