Coffee Prices Climb as Dollar Weakens, But Supply Concerns Mount

Recent trading activity in global coffee markets revealed a complex picture of rising prices tempered by structural challenges. On Friday, March arabica futures advanced 0.92% while March ICE robusta contracts surged 2.88%, with robusta hitting a 1.5-month peak. The primary catalyst behind this coffee prices rally was the dollar index’s descent to a 3.5-month low, triggering short-covering activity across commodity markets including coffee. However, beneath the surface gains lies a mosaic of bullish and bearish factors reshaping the outlook for coffee prices.

Dollar Weakness Provides Immediate Support

The inverse relationship between currency strength and commodity valuations proved decisive this week. As the dollar index weakened substantially, investors covering short positions in coffee and other commodities created immediate upward pressure. This mechanical buying offers tactical support but masks deeper supply and demand dynamics unfolding across the world’s two primary coffee-producing regions.

Brazilian Production Pressures Create Near-Term Tailwinds

Brazil’s role as the world’s largest arabica producer means its weather patterns carry outsized significance for global coffee prices. Data from Somar Meteorologia revealed that Minas Gerais, the nation’s premier coffee-growing area, received only 33.9 mm of rainfall during the week ended January 16—a mere 53% of historical averages. This moisture deficit, if sustained, threatens yield potential for the upcoming harvest.

Export flows from Brazil also signaled tightening supplies. Cecafe reported that December green coffee exports plummeted 18.4% year-over-year to 2.86 million bags, with arabica shipments down 10% and robusta exports collapsing 61%. These declining export volumes provided psychological support for coffee prices, though some of the weakness reflected logistics and timing rather than fundamental scarcity.

Vietnamese Supply Surge Counters Bullish Sentiment

Offsetting Brazilian supply tightness, Vietnam’s 2025 coffee exports jumped 17.5% year-over-year to 1.58 million metric tons, according to the Vietnam National Statistics Office. As the world’s dominant robusta producer, Vietnam’s robust export performance kept downward pressure on robusta prices, despite nearby strength. Vietnam’s 2025/26 production is projected at 1.76 million metric tons (29.4 million bags), representing a 4-year high and signaling ample supplies entering the market.

Inventory Recovery Signals Shifting Market Balance

Paradoxically, coffee prices gained despite improving warehouse conditions. ICE-monitored arabica inventories recovered to 461,829 bags on Wednesday—a 2.5-month high though still well below November’s 1.75-year low of 398,645 bags. Similarly, robusta stocks climbed to 4,609 lots on Friday, up from December’s 1-year low of 4,012 lots. This inventory recovery, while gradual, represented a headwind for coffee prices as it suggested the market was less immediately constrained than recent readings implied.

Global Production Forecasts Paint Abundant Future

Medium-term outlooks added further complexity to the coffee prices equation. The USDA Foreign Agriculture Service projected that 2025/26 world coffee production will reach a record 178.848 million bags, up 2.0% year-over-year. However, this aggregate masks divergent trends: arabica production is forecast to decline 4.7% to 95.515 million bags while robusta expands 10.9% to 83.333 million bags. Brazil’s 2025/26 coffee production is anticipated to fall 3.1% to 63 million bags, while Vietnam’s output climbs 6.2% to a 4-year high of 30.8 million bags.

Conab’s December estimate pointed to similar abundance, raising Brazil’s total 2025 production forecast by 2.4% to 56.54 million bags. These rising production estimates weighed on long-term sentiment for coffee prices, as ample supplies throughout the projection period suggested limited upside beyond near-term tactical moves.

Global Export Dynamics Inject Caution

The International Coffee Organization’s November report revealed that global coffee exports for the current marketing year declined just 0.3% year-over-year to 138.658 million bags, indicating resilient shipment activity despite market tightness. The USDA further cautioned that 2025/26 ending stocks will fall only 5.4% to 20.148 million bags from 21.307 million bags in 2024/25, suggesting the market’s buffer against supply disruptions remains adequate.

The Coffee Prices Outlook: Balancing Near-Term and Structural Factors

The divergence between near-term strength and longer-term headwinds creates an unsettled environment for coffee prices. Dollar weakness and Brazilian supply concerns provided near-term support, but looming production surpluses—particularly the Vietnamese robusta boom—constrained enthusiasm. For traders navigating coffee prices markets, the challenge lies in separating tactical bounces from structural trends as the market absorbs competing signals from supply forecasts, inventory patterns, and currency dynamics.