Arabica Coffee Market Shows Resilience Amid Brazilian Real Strength

Arabica coffee demonstrated surprising strength on Thursday trading, closing with modest gains as Brazil’s currency rallied to its highest level in more than two months against the dollar. The March arabica contract finished up 0.20 cents, or 0.06%, while robusta prices moved in the opposite direction, declining 0.52 cents to close down 1.28%. The divergent performance between the two coffee varieties reflects deeper market dynamics driven by regional supply conditions and currency movements.

Price Recovery Driven by Currency and Short Covering

The underlying driver of arabica’s rebound from morning weakness centers on the Brazilian real’s appreciation. When Brazil’s currency strengthens, coffee producers in the world’s largest arabica-growing nation become less aggressive in selling their crops at current prices, as the stronger currency makes their export revenues equivalent to higher returns in local terms. This dynamic triggered short-covering activity among investors holding bearish positions, providing additional momentum to the arabica contract’s recovery.

Initial selling pressure came from weather forecasts suggesting regular precipitation across Brazil’s key growing regions this week. The Weather Channel predicted daily showers in Minas Gerais, which accounts for the largest share of Brazil’s arabica production, creating concerns about crop impacts and market flooding. However, the currency movement ultimately overwhelmed these bearish concerns by mid-session.

Brazilian Supply Constraints Support Market

Export data from Cecafe revealed a notable contraction in Brazil’s coffee shipments during December. Total green coffee exports fell 18.4% year-over-year to 2.86 million bags, with arabica shipments dropping 10% annually to 2.6 million bags. Robusta exports experienced a steeper decline of 61% year-over-year, down to 222,147 bags. These reduced shipments suggest tightening availability from the world’s dominant supplier.

Rainfall patterns in Brazil’s arabica heartland have remained below historical norms, adding support to price fundamentals. Somar Meteorologia reported that Minas Gerais received 33.9 mm of rainfall during the week ending January 16—representing just 53% of the long-term average. Below-average precipitation typically restricts crop development and threatens yield potential, a factor that generally provides price support for existing stocks.

Inventory developments at ICE exchanges show mixed signals. Arabica inventories recovered to 461,829 bags last Wednesday, climbing from the 1.75-year low of 398,645 bags recorded on November 20. This represents a 2.5-month high but still reflects relatively constrained supply levels. Robusta inventories similarly recovered to 4,532 lots, up from the 1-year low of 4,012 lots set on December 10, now at a 1.75-month peak.

Vietnam’s Rising Production Pressures Robusta Prices

Vietnam, the world’s largest robusta producer, is flooding markets with increased supplies that weigh specifically on robusta prices. The country’s 2025 coffee exports surged 17.5% year-over-year to 1.58 million metric tons, according to the National Statistics Office. Looking ahead, Vietnam’s 2025/26 production is projected to climb 6% annually to 1.76 million metric tons, or 29.4 million bags—marking a 4-year production high. The Vietnam Coffee and Cocoa Association has indicated that 2025/26 output could run 10% higher than the previous crop year if weather remains cooperative.

This emerging supply abundance from Southeast Asia creates asymmetrical pressure across coffee varieties, supporting arabica relatively more than robusta as buyers shift preferences toward higher-quality beans in an environment of global abundance.

Global Production Forecasts Point to Tightening Supplies

The International Coffee Organization reported on November 7 that global coffee exports for the current marketing year fell 0.3% year-over-year to 138.658 million bags, suggesting modest contraction despite production strength elsewhere. However, the USDA’s Foreign Agriculture Service painted a different picture in its December 18 report, projecting that world coffee production in 2025/26 will reach a record 178.848 million bags, reflecting a 2.0% year-over-year increase.

The FAS forecast reveals important regional divergence: arabica production is expected to decline 4.7% to 95.515 million bags, while robusta production advances 10.9% to 83.333 million bags. For Brazil specifically, FAS projects a 3.1% production decline to 63 million bags in 2025/26—a significant adjustment downward. Vietnam, by contrast, is forecast to increase output by 6.2% year-over-year to reach 30.8 million bags, hitting a 4-year high.

Despite record total production, ending stocks are forecasted to fall 5.4% to 20.148 million bags from 21.307 million bags in 2024/25. This combination—rising production but declining global reserves—creates complex price dynamics where supply distribution and quality considerations become increasingly important. Arabica’s resilience reflects investor recognition that while global supplies are ample, the distribution favors higher-quality arabica as Brazil’s output moderates and demand remains steady across premium segments.

The market dynamics observed on Thursday, with arabica recovering strength while robusta weakened, appear to reflect these longer-term structural shifts in global coffee markets. Currency movements provide near-term trading stimulus, but the underlying arabica advantage stems from tightening availability relative to competing robusta supplies flooding in from Southeast Asia.