Coffee Market Faces Headwinds as Dollar Strength Pressures Gains—A Barchart Commodity Analysis

March arabica coffee closed with losses of -1.95 points (-0.55%), while robusta futures posted gains of +62 points (+1.57%) this week. Despite an intraweek rally that pushed prices to 2-week highs, the coffee complex ultimately settled in mixed territory, with arabica unable to maintain its upside momentum. The primary culprit: a surging dollar index that reached 1-week highs and triggered widespread profit-taking in coffee contracts. For comprehensive commodity market insights like this analysis, traders monitor resources like barchart’s proprietary reporting on agricultural and energy futures.

Arabica Struggles on Currency Headwinds While Robusta Holds Ground

Currency movements continue to exert outsized influence on coffee pricing dynamics. A stronger dollar makes coffee more expensive for foreign buyers, creating headwinds for arabica demand even as physical supply concerns persist. The robusta complex, by contrast, demonstrated relative resilience this week, buoyed by its own supply-side pressures and regional export dynamics that differ markedly from arabica-growing regions.

Market participants have noted that near-term volatility in coffee futures remains tied to macroeconomic factors beyond crop conditions themselves—a reality that underscores the importance of technical analysis alongside fundamental supply-demand assessments.

Brazil and Indonesia Face Supply Challenges Amid Weather Threats

Brazil’s arabica production outlook has drawn increased scrutiny following recent weather patterns. The country’s largest arabica-growing area, Minas Gerais, recently experienced significantly below-average precipitation, with weekly rainfall reaching just 11.1 millimeters—approximately 17% of the historical average. This moisture deficit during critical growth phases raises concerns about potential crop stress, even as Brazil’s overall 2025/26 production forecast shows resilience.

Indonesia, the world’s third-largest robusta producer, faces more acute challenges. Widespread flooding across the archipelago threatens to reduce coffee exports by as much as 15% during the 2025/26 season, according to the Association of Indonesian Coffee Exporters and Industry. The flooding has already affected approximately one-third of Indonesia’s arabica farms in northern Sumatra, though robusta crops have proven somewhat less vulnerable to waterlogging. These regional disruptions provide underlying support to both arabica and robusta price structures.

Vietnam’s Robust Output Growth Pressures Robusta Prices

Vietnam’s coffee sector continues its expansion trajectory. Recent export data showed that November shipments surged 39% year-over-year to 88,000 metric tons, with January-through-November exports climbing 14.8% year-over-year to 1.398 million metric tons. Looking ahead, Vietnam’s 2025/26 production is projected to reach 1.76 million metric tons (29.4 million bags)—representing a 6% increase and a 4-year high. The Vietnam Coffee and Cocoa Association has suggested output could rise as much as 10% if weather cooperates, further weighing on global robusta valuations.

As the world’s largest robusta producer, Vietnam’s outsized supply growth creates a structural headwind for robusta futures despite buoyant demand from traditional consuming nations.

Global Coffee Inventories Signal Tightening Supply Picture

Exchange-monitored coffee stocks paint a more nuanced picture. ICE arabica inventories recently fell to a 1.75-year low of 398,645 bags before recovering to 456,477 bags at recent reporting. Robusta inventories similarly dipped to a 1-year low of 4,012 lots before rebounding to 4,278 lots. This inventory volatility reflects shifting market sentiment as participants balance near-term buying interest against medium-term supply expectations.

US coffee purchases have stabilized following the reversal of previous tariff regimes. American buyers had dramatically curtailed Brazilian coffee acquisitions when tariffs were in effect, with purchases from August through October dropping 52% year-over-year to 983,970 bags. With trade policy now more favorable, buyers have renewed interest in Brazilian supplies, supporting both prices and inventory flows into North American consumption centers.

USDA Forecasts Record Global Production for 2025/26 Season

The USDA’s Foreign Agriculture Service released updated production estimates that paint a picture of expanding global capacity. World coffee production for 2025/26 is projected to increase 2.0% year-over-year to a record 178.848 million bags. However, this aggregate masks diverging regional trends: arabica output is forecast to decline 4.7% to 95.515 million bags, while robusta production accelerates 10.9% to 83.333 million bags.

Brazil’s production is expected to contract 3.1% to 63 million bags, a meaningful decline from the prior year. Vietnam’s output, by contrast, climbs 6.2% to a 4-year high of 30.8 million bags. Ending global stocks are projected to fall 5.4% to 20.148 million bags from the prior year’s 21.307 million bags, suggesting a modest tightening of the supply picture despite record production volumes.

The mathematics of the global coffee market in 2025/26 therefore point to structural balance rather than either surplus or shortage—a dynamic that supports prices at fair value levels while limiting dramatic moves in either direction. Traders seeking detailed analysis of these supply-demand intersection points will find barchart’s commodity research particularly valuable for navigating complex cross-currents in coffee futures trading.