Coffee Prices Rally as Dollar Weakness Creates Opening for Bulls

The commodity market witnessed a favorable setup for coffee buyers as the dollar extended its downward trend on Monday. March arabica futures advanced 5.35 points, translating to a +1.52% gain, while March robusta contracts climbed 55 points for a +1.33% increase. This upside movement reflected the broader commodity rally driven by continued depreciation in the dollar index, which weakened another 0.5% to reach a fresh 4-month low. Historically, greenback weakness tends to boost commodity valuations across the board, and coffee has been no exception during this recent cycle.

Dollar Depreciation Fuels Rally

Currency movements remain a critical driver for coffee prices. When the dollar weakens against other major currencies, commodities priced in dollars become more attractive to international buyers, creating natural support for price levels. The recent deterioration in the dollar index has provided this type of tailwind. Beyond the currency tailwind, broader trends in coffee supply dynamics are adding complexity to the outlook for coffee prices.

Brazil Supply Concerns Support Market

Brazil, accounting for roughly one-third of global arabica production, continues to experience conditions that could tighten near-term supplies. Cecafe reported that Brazilian green coffee exports for December contracted sharply by 18.4% compared to the prior year, falling to 2.86 million bags. Within this decline, arabica shipments dropped 10% year-over-year to 2.6 million bags, while robusta exports plummeted 61% year-over-year to just 222,147 bags. Compounding these export challenges, weather conditions in Minas Gerais—Brazil’s most critical arabica growing region—remain concerning. Somar Meteorologia reported that the region received only 33.9 millimeters of rain during the week ending January 16, representing just 53% of the historical average. This below-normal precipitation could eventually constrain yield potential for the next crop cycle.

However, the inventory picture presents a more nuanced backdrop for coffee prices. ICE-monitored arabica stocks initially fell to a 1.75-year low of 398,645 bags in November but have since recovered to 461,829 bags as of mid-January. Similarly, robusta inventories declined to 1-year lows in December before bouncing to 4,609 lots by late January. This inventory rebuild slightly moderates some of the supply tightness concerns.

Vietnam’s Rising Output Weighs on Robusta

Vietnam, the world’s largest robusta producer, is ramping up output significantly. The country’s coffee exports jumped 17.5% year-over-year in 2025 to 1.58 million metric tons, according to official statistics. Production is projected to climb another 6% year-over-year to 1.76 million metric tons, or approximately 29.4 million bags, marking a 4-year peak. The Vietnam Coffee and Cocoa Association indicated that output could rise 10% higher than the previous season if favorable weather persists. This abundance of Vietnamese robusta supplies creates headwinds specifically for robusta prices, even as arabica markets may benefit from Brazilian supply tightness.

Production Forecasts Paint Mixed Picture

Global supply outlooks show mixed signals for coffee prices. The International Coffee Organization reported that worldwide coffee exports for the current marketing year declined slightly by 0.3% year-over-year to 138.658 million bags, suggesting a modest tightening. However, the USDA Foreign Agriculture Service projects that world coffee production in 2025/26 will increase 2.0% year-over-year to a record 178.848 million bags. Within this total, arabica production is forecast to decline 4.7% to 95.515 million bags while robusta output expands 10.9% to 83.333 million bags.

On a country level, Brazil’s 2025/26 production is expected to fall 3.1% year-over-year to 63 million bags—a notable contraction. Meanwhile, Vietnam’s output is projected to rise 6.2% year-over-year to 30.8 million bags, the highest in four years. Looking further ahead, global ending stocks for 2025/26 are forecast to decline 5.4% to 20.148 million bags from 21.307 million bags in the prior year, suggesting a tightening of the global supply balance overall.

The path forward for coffee prices remains contested between supportive structural factors and offsetting headwinds. While dollar weakness and Brazilian supply concerns provide fundamental support, expanding Vietnamese production and the prospect of record global output create counterbalancing pressure on coffee prices. Market participants will likely remain focused on weather developments in Brazil and execution of the Vietnamese harvest as key variables determining the trajectory of coffee prices through the remainder of the season.