Dubai – Qahwa World
Coffee futures finished higher on Friday after reversing early weakness, supported by currency movements and renewed supply concerns. March arabica coffee contracts rose sharply, while March robusta prices posted a modest gain.
A key driver of the rebound was strength in Brazil’s currency. The Brazilian real climbed to its strongest level in roughly two weeks against the U.S. dollar, making exports less attractive for Brazilian producers. That shift prompted short covering in coffee futures and helped lift prices into the close.
Weather-related disruptions in Southeast Asia are also lending support. Severe flooding in Indonesia has affected a significant portion of arabica-growing areas in northern Sumatra. Industry officials estimate the damage could cut Indonesia’s coffee exports by up to 15% during the 2025/26 season. Indonesia is a major global supplier, particularly of robusta coffee, and any reduction in output adds to market uncertainty.
Concerns about Brazil’s crop conditions have not faded. Recent data from a private weather firm showed that Minas Gerais—Brazil’s largest arabica-producing region—received far less rainfall than normal in late December. Below-average moisture during this critical period has raised doubts about yield potential for the upcoming harvest.
Inventory trends remain another supportive factor. Arabica coffee stocks monitored by ICE fell to multi-year lows in November before rebounding modestly in recent weeks. Robusta inventories followed a similar pattern, touching their lowest levels in a year before seeing a short-term recovery. Despite the recent uptick, overall stock levels remain relatively tight by historical standards.
On the demand side, U.S. coffee inventories remain constrained. Earlier trade barriers sharply reduced American purchases of Brazilian coffee during late summer and early fall. Although those tariffs have since been reduced, imports have yet to fully recover, leaving supply channels under pressure.
Still, longer-term supply expectations continue to cap rallies. Brazil’s national crop agency recently raised its estimate for the country’s 2025 coffee output, citing improved conditions compared with earlier forecasts. Meanwhile, robusta markets remain weighed down by strong production and export data from Vietnam.
Vietnamese coffee shipments surged late last year, and output for the 2025/26 season is expected to rise further if weather remains favorable. As the world’s largest robusta producer, Vietnam’s expanding supply continues to temper bullish sentiment in that segment of the market.
Globally, mixed signals persist. While international coffee exports have edged slightly lower year over year, production forecasts point to a record crop in the coming season. Arabica output is projected to decline, but gains in robusta production are expected to more than offset those losses. Ending stocks are forecast to fall modestly, suggesting a tighter balance than last year but not an outright shortage.
Overall, coffee prices are being pulled in opposite directions—near-term supply risks and currency dynamics are supporting the market, while expectations of ample global production continue to limit upside potential.
