Vietnam Coffee Production Surge and Weather Relief Pressure Global Bean Prices

Coffee markets are navigating a complex landscape shaped by divergent supply dynamics and currency headwinds. March arabica futures (KCH26) declined 3.41% following forecasts of significant rainfall expected across Brazil’s central growing regions, while March robusta (RMH26) fell 1.02% as a stronger U.S. dollar—reaching its highest point in four weeks—weighed on commodity valuations across the board.

Global Supply Dynamics Overwhelm Weather Benefits

The fundamental driver behind current price weakness stems from an anticipated glut in global coffee production. The USDA Foreign Agriculture Service projects world coffee output for 2025/26 will reach a record 178.848 million bags, representing a 2% year-over-year climb. This expansion masks a critical divergence: while arabica production is expected to contract 4.7% to 95.515 million bags, robusta supply is projected to surge 10.9% to 83.333 million bags.

Vietnam’s emergence as a production powerhouse is reshaping the robusta market. The country’s 2025/26 coffee output is forecast to climb 6.2% to 30.8 million bags—a four-year high—building on 2025 export momentum that has already reached 1.58 million metric tons, reflecting a 17.5% year-over-year surge according to Vietnam’s National Statistics Office. The Vietnam Coffee and Cocoa Association suggests production could expand even further, potentially reaching 10% higher than the prior year if favorable growing conditions persist.

Brazil’s Output Recovery Offsets Arabica Supply Concerns

Despite recent drought concerns in key arabica regions, Brazil’s crop projections indicate substantial availability ahead. The country’s crop forecasting agency Conab raised its 2025 harvest estimate by 2.4% to 56.54 million bags. The USDA separately forecasts Brazil’s 2025/26 yield will total 63 million bags, though this represents a 3.1% decline from prior estimates—underscoring the volatility inherent in commodity forecasting.

Last Thursday demonstrated how weather narratives can provide temporary price support. When data from Somar Meteorologia indicated that Minas Gerais, the primary arabica production hub, received only 47.9 mm of rainfall during the week ending January 2—equating to just 67% of the historical average—arabica prices climbed to a four-week high. However, this rally has now reversed as rainfall forecasts suggest the drought pressure will ease.

Market Structure Signals Growing Oversupply

Inventory trends provide additional confirmation of emerging supply pressures. ICE arabica stocks fell to a 1.75-year low of 398,645 bags on November 20, yet have since rebounded to 461,829 bags—a 2.5-month high as of Wednesday. Robusta inventories similarly bottomed at one-year lows in December before recovering to five-week highs, a pattern consistent with seasonal destocking and the market’s attempt to absorb additional supply flows.

The International Coffee Organization reported that global coffee exports for the current marketing year (October through September) declined marginally by 0.3% year-over-year to 138.658 million bags, suggesting limited tightness at the export level despite production concerns.

Tariff Normalization Fails to Stimulate Demand

U.S. import dynamics underscore the demand-side weakness supporting lower valuations. Between August and October 2024, when elevated tariffs on Brazilian coffee were in effect, U.S. imports plummeted 52% year-over-year to just 983,970 bags. Although tariffs have subsequently been reduced, U.S. coffee inventories remain constrained, and import recovery has been gradual. This suggests that even as trade barriers normalize, demand recovery may not match the pace of incoming supplies.

Price Pressure to Persist as Ending Stocks Contract

Looking forward, the ICO’s supply-demand balance predicts ending stocks for 2025/26 will fall 5.4% to 20.148 million bags from 21.307 million bags in 2024/25. While this stock contraction indicates some market tightening, it arrives amid record global production—a dynamic that typically constrains price appreciation. Vietnam coffee price dynamics will remain pivotal to the broader robusta market, given the country’s dominant position and expanding harvest estimates.

The convergence of abundant production forecasts, currency strength in the U.S. dollar, normalizing inventories, and soft global demand creates a structural environment where downside price pressure appears more likely than bullish reversals in the near term.