March arabica coffee (KCH26) on Tuesday closed up +4.20 (+1.18%).  March ICE robusta coffee (RMH26) closed up +36 (+0.92%).

Coffee prices settled higher on Tuesday amid concerns that excessive dryness in Brazil could lead to smaller coffee yields.  Last Thursday, arabica rallied to a 1-month high due to below-average rainfall in Brazil, the world's largest arabica producer.  Somar Meteorologia reported Monday that Brazil's largest arabica coffee-growing area, Minas Gerais, received 26.5 mm of rain during the week ended January 9, or 29% of the historical average.

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Shrinking ICE coffee inventories are bullish for prices.  ICE-monitored arabica inventories fell to a 1.75-year low of 398,645 bags on November 20, although they recovered to a 2.5-month high of 461,829 bags last Wednesday.  ICE robusta coffee inventories fell to a 1-year low of 4,012 lots on December 10 but recovered to a 5-week high of 4,278 lots on December 23 and 24.

Soaring coffee exports from Vietnam, the world's largest robusta producer, are bearish for robusta prices.  Vietnam's National Statistics Office reported last Monday that Vietnam's 2025 coffee exports jumped +17.5% y/ to 1.58 MMT.

The outlook for ample coffee supplies is weighing on prices.  On December 4, Conab, Brazil's crop forecasting agency, raised its total Brazil 2025 coffee production estimate by 2.4% to 56.54 million bags, from a September estimate of 55.20 million bags.

Increased Vietnamese coffee supplies are bearish for prices.  Vietnam's 2025/26 coffee production is projected to climb +6% y/y to 1.76 MMT, or 29.4 million bags, a 4-year high.  Also, the Vietnam Coffee and Cocoa Association (Vicofa) said on October 24 that Vietnam's coffee output in 2025/26 will be 10% higher than the previous crop year if weather conditions remain favorable.   Vietnam is the world's largest producer of robusta coffee.

Signs of tighter global coffee supplies are supportive of prices, as the International Coffee Organization (ICO) on November 7 reported that global coffee exports for the current marketing year (Oct-Sep) fell -0.3% y/y to 138.658 million bags.