Limited Rain Chances in Brazil Boost Coffee Prices

March arabica coffee (KCH26) on Thursday closed up +2.10 (+0.59%). March ICE robusta coffee (RMH26) closed up +48 (+1.21%).

Coffee prices recovered from early losses on Thursday and settled higher after updated weather forecasts reduced the likelihood of rain in Brazil's coffee-growing areas over the next week. Coffee prices initially moved lower on Thursday, with arabica posting a 1.5-week low after the dollar index (DXY00) rallied to a 6-week high.

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Last Thursday, arabica rallied to a 1-month high due to below-average rainfall in Brazil, the world's largest arabica producer. Somar Meteorologia reported Monday that Brazil's largest arabica coffee-growing area, Minas Gerais, received 26.5 mm of rain during the week ended January 9, or 29% of the historical average.

Shrinking ICE coffee inventories are bullish for prices. ICE-monitored arabica inventories fell to a 1.75-year low of 398,645 bags on November 20, although they recovered to a 2.5-month high of 461,829 bags last Wednesday. ICE robusta coffee inventories fell to a 1-year low of 4,012 lots on December 10 but recovered to a 5-week high of 4,278 lots on December 23 and 24.

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 last Monday that Vietnam's 2025 coffee exports jumped +17.5% 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.