Coffee Price Increase Gains Momentum Amid Currency Shifts and Supply Constraints

Coffee prices posted notable gains on Friday, with March arabica futures advancing 0.92% while March robusta coffee climbed 2.88%, reaching its highest level in 1.5 months. This coffee price increase reflects a confluence of market forces that have realigned trader positions and supply expectations across the global market. The recent rally demonstrates how external factors—particularly currency movements and logistics constraints—can ripple through commodity pricing dynamics.

Dollar Weakness Triggers Technical Rebound in Coffee Markets

The primary catalyst for Friday’s coffee price increase came from a significant decline in the U.S. dollar index, which retreated to its lowest point in 3.5 months. When the dollar weakens, commodities priced in dollars become more attractive to foreign buyers, and traders holding short positions are forced to cover their bets, creating additional buying pressure. This mechanistic relationship between currency movements and commodity prices explains why coffee surged alongside broader commodity strength during the session. The timing of this dollar weakness injected fresh momentum into a market that has been navigating conflicting supply signals.

Brazilian Export Disruptions Support Near-Term Coffee Prices

Supply-side pressures are bolstering the coffee price increase from the fundamental perspective. Brazil, accounting for the world’s largest arabica coffee production, reported a significant contraction in December exports. Total green coffee shipments declined 18.4% year-over-year to 2.86 million bags, with arabica exports falling 10% annually to 2.6 million bags and robusta exports experiencing a steeper 61% drop to 222,147 bags. These export declines reflect mounting logistical challenges rather than production collapse, creating a temporary tightness in available supplies reaching global markets.

Contributing to this supply squeeze is unfavorable weather in Brazil’s key growing regions. Minas Gerais, the nation’s premier arabica belt, received only 33.9 mm of rainfall during the week ended January 16—just 53% of the historical average for that period. Below-normal precipitation raises concerns about crop development for future harvests, lending additional support to current price levels as traders anticipate potential long-term supply reductions.

Vietnamese Production Surge Pressures Robusta Coffee Prices

Offsetting Brazilian supply constraints is an aggressive expansion from Vietnam, the world’s dominant robusta coffee producer. Vietnam’s 2025 coffee exports accelerated 17.5% year-over-year to 1.58 million metric tons, demonstrating the competitive supply dynamics in the robusta segment. Looking forward, Vietnam’s 2025/26 production is projected to climb 6% annually to 1.76 million metric tons (29.4 million bags), potentially marking a 4-year production high if favorable weather persists.

This divergence in supply trends explains why arabica and robusta coffee prices are responding differently to market conditions. While Brazilian supply disruptions support arabica valuations, abundant Vietnamese robusta availability exerts downward pressure on the robusta segment. Coffee traders must navigate these divergent regional supply stories when positioning for price swings.

Global Inventory Recovery Modulates Coffee Price Increases

The coffee price increase narrative grows more nuanced when examining warehouse inventory patterns. ICE-monitored arabica stocks, which had fallen to a 1.75-year low of 398,645 bags in November, recovered to 461,829 bags—a 2.5-month high—by mid-January. Similarly, robusta inventories climbed to 4,609 lots, their highest level in 1.75 months, after touching a 1-year low of 4,012 lots in December. This inventory recovery suggests some moderation in supply tightness from the technical perspective, potentially capping additional price enthusiasm despite fundamental concerns.

Medium-Term Production Outlook Presents Mixed Signals

The International Coffee Organization reported that global coffee exports for the October-September marketing year declined 0.3% annually to 138.658 million bags, indicating tighter global trade flows. However, looking to the 2025/26 production season, the USDA’s Foreign Agriculture Service projects that world coffee production will increase 2.0% to a record 178.848 million bags. This expansion masks divergent regional trends: arabica production is forecast to decline 4.7% to 95.515 million bags while robusta output surges 10.9% to 83.333 million bags.

Brazil’s production is expected to contract 3.1% to 63 million bags for the 2025/26 season, reversing the crop growth from earlier estimates. Conversely, Vietnam’s projected output of 30.8 million bags represents a 6.2% increase and marks its strongest production showing in four years. These shifting production patterns will likely define coffee price dynamics through the coming season, as the market reprices regional supply balances and adjusts for the structural supply shift toward robusta-heavy production.

Ending global coffee stocks are forecast to decline 5.4% to 20.148 million bags from the prior season’s 21.307 million bags, signaling that production increases will barely offset expected demand, supporting the case for coffee prices to maintain current strength without achieving breakout gains.