Coffee Prices Slip on Brazil Rains and a Recovery in ICE Inventories

March arabica coffee (KCH26) today is down -0.40 (-0.12%).  March ICE robusta coffee (RMH26) is down -0.56 (-1.37%).

Coffee prices are slightly lower today on rain forecasts for Brazil.  The Weather Channel has forecast showers every day this week in Minas Gerais, Brazil's largest arabica coffee-growing region.

The recovery in ICE coffee inventories is also bearish for prices.  ICE-monitored 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 last Wednesday.  Also, ICE robusta coffee inventories fell to a 1-year low of 4,012 lots on December 10 but recovered to a 1.75-month high of 4,532 lots today.

Limiting losses in arabica coffee is the strength of the Brazilian real.  The real  (^USDBRL) rallied to a 1.5-month high against the dollar today, discouraging export sales by Brazil's coffee producers.

Shrinking Brazilian coffee exports are supportive of coffee prices.  Cecafe reported that Brazil's total Dec green coffee exports fell -18.4% to 2.86 million bags, with arabica coffee exports down -10% y/y to 2.6 million bags and robusta coffee exports down -61% y/y to 222,147 bags.

Below-average rainfall in Brazil, the world's largest arabica producer, is supportive for coffee prices.  Somar Meteorologia reported Monday that Brazil's largest arabica coffee-growing area, Minas Gerais, received 33.9 mm of rain during the week ended January 16, or 53% of the historical average.  

The outlook for ample coffee supplies is a bearish factor for prices.  On December 4, Conab, Brazil's crop forecasting agency, raised its total Brazil 2025 coffee production estimate by 2.4% to 56.54 million bags, from a September estimate of 55.20 million bags.  

Soaring coffee exports from Vietnam, the world's largest robusta producer, are bearish for robusta prices.  Vietnam's National Statistics Office reported on January 5 that Vietnam's 2025 coffee exports jumped by +17.5% y/y to 1.58 MMT.  

Increased Vietnamese coffee supplies are negative for prices.  Vietnam's 2025/26 coffee production is projected to climb +6% y/y to 1.76 MMT, or 29.4 million bags, a 4-year high.  Also, the Vietnam Coffee and Cocoa Association (Vicofa) said on October 24 that Vietnam's coffee output in 2025/26 will be 10% higher than the previous crop year if weather conditions remain favorable.   Vietnam is the world's largest producer of robusta coffee.

Signs of tighter global coffee supplies are supportive of prices, as the International Coffee Organization (ICO) on November 7 reported that global coffee exports for the current marketing year (Oct-Sep) fell -0.3% y/y to 138.658 million bags.

The USDA's Foreign Agriculture Service (FAS) bi-annual report on December 18 projected that world coffee production in 2025/26 will increase by +2.0% y/y to a record 178.848 million bags, with a -4.7% decrease in arabica production to 95.515 million bags and a +10.9% increase in robusta production to 83.333 million bags.  FAS forecasted that Brazil's 2025/26 coffee production will decline by -3.1% y/y to 63 million bags and that Vietnam's 2025/26 coffee output will rise by 6.2% y/y to a 4-year high of 30.8 million bags.  FAS forecasts that 2025/26 ending stocks will fall by -5.4% to 20.148 million bags from 21.307 million bags in 2024/25.