Global Coffee Prices Rally on Dollar Weakness and Tight Supply Dynamics

Coffee prices gained significant momentum on Monday as the U.S. dollar index declined sharply to fresh lows, creating favorable conditions for commodity trading. March arabica coffee contracts closed with gains of +1.52%, while March ICE robusta coffee advanced +1.33%. This upward movement reflected a confluence of factors reshaping the global coffee market, from currency dynamics to production challenges across major growing regions.

Currency Headwinds Create Tailwinds for Coffee Prices

The continued weakness in the dollar index proved instrumental in driving the recent coffee rally. With the U.S. currency retreating another -0.5% to 4-month lows, imported commodities became more attractive to international buyers. This dynamic has historically supported coffee prices, as a weaker dollar lowers the cost of purchasing coffee in foreign currencies and increases demand from overseas markets. The relationship between currency movements and commodity valuations underscores how macroeconomic factors ripple through the coffee trade.

Brazil’s Challenges Reshape Arabica Coffee Dynamics

Brazil, the world’s largest arabica coffee producer, faces a complex supply landscape. Recent data from Cecafe revealed that December green coffee exports contracted sharply by -18.4% to 2.86 million bags year-over-year, with arabica shipments declining -10% to 2.6 million bags. This pullback in Brazilian arabica coffee supply tightens the global market, supporting price floors.

Adding to these challenges, weather conditions in Brazil’s prime coffee-growing regions have remained concerning. Minas Gerais, which serves as Brazil’s largest arabica coffee production hub, received only 33.9 mm of rainfall during mid-January—just 53% of the historical average, according to Somar Meteorologia. Such below-average precipitation raises questions about crop development and future yield potential, creating additional structural support for arabica coffee valuations.

Meanwhile, Conab’s updated forecast suggested ample supplies ahead. In December, Brazil’s official crop forecasting agency raised its 2025 total production estimate by +2.4% to 56.54 million bags from a prior September projection of 55.20 million bags. This upward revision introduces bearish pressures on coffee prices, suggesting that supply tightness may not persist indefinitely.

Vietnamese Robusta Surge Introduces New Market Dynamics

Vietnam’s role as the world’s largest robusta coffee producer has become increasingly pivotal. The country’s 2025 coffee exports surged by +17.5% year-over-year to 1.58 million metric tons, according to Vietnam’s National Statistics Office. Looking ahead, Vietnam Coffee and Cocoa Association projections indicate that 2025/26 production could climb by an additional 6% to 1.76 million metric tons—potentially the highest level in four years if weather conditions cooperate.

This Vietnamese robusta coffee production expansion introduces competing pressures on the global market. While tightness in arabica supplies supports coffee prices, the abundance of robusta alternatives moderates upside potential in the broader category.

Inventory Signals Send Mixed Messages

The trajectory of ICE-monitored coffee inventories reveals shifting market psychology. Arabica stocks had fallen to multi-year lows of 398,645 bags in November, but recovered to 461,829 bags by mid-January—a reversal that suggests easing immediate scarcity. Similarly, robusta inventories climbed from 1-year lows to recent highs, indicating greater availability entering key trading periods.

These inventory recoveries introduce headwinds to coffee prices. Markets that face imminent supply shortages typically command premium valuations; as available supplies increase, price support erodes proportionally.

Global Outlook: Record Production Amid Structural Shifts

The international picture presents a paradox for coffee prices. The International Coffee Organization reported that global coffee exports for the current marketing year fell -0.3% year-over-year to 138.658 million bags through November, suggesting tightness. However, the USDA’s Foreign Agriculture Service painted a different picture on its December report.

FAS projected that 2025/26 global coffee production will reach a record 178.848 million bags, representing +2.0% growth. Within this total, arabica production is expected to decline -4.7% to 95.515 million bags, while robusta surges +10.9% to 83.333 million bags. FAS specifically forecast Brazil’s 2025/26 output at 63 million bags (down -3.1% from prior year) and Vietnam’s production climbing +6.2% to 30.8 million bags.

The forecast also indicated that global coffee prices could face structural pressure: ending stocks for 2025/26 are projected to decline -5.4% to 20.148 million bags from 21.307 million bags in the prior year, though the level remains manageable relative to consumption patterns.

What Lies Ahead for Coffee Prices

The near-term outlook for coffee prices hinges on whether supply tightness in arabica varieties can offset robusta abundance. Dollar weakness provides a temporary tailwind, but fundamental supply dynamics appear poised to reassert dominance over time. Major producing nations—Brazil and Vietnam—operate under different constraints, creating asymmetric pressures across the coffee complex. Investors monitoring coffee prices should track both currency movements and production reports closely, as both remain critical to market direction through 2026 and beyond.