Just noticed arabica coffee bouncing back Thursday after taking some early hits from Brazil rain forecasts. The Brazilian real rally to a 2.25-month high against the dollar seems to be the main driver here - stronger currency means their producers are less eager to export, which actually supports prices. Kind of counterintuitive but that's how it works.

So here's what's interesting from a market perspective: arabica closed up 0.06% while robusta dropped 1.28%. The arabica recovery makes sense when you look at the bigger picture. ICE inventories had climbed to a 2.5-month high last Wednesday at 461,829 bags, which was bearish initially, but export data tells a different story. Brazil's December green coffee exports fell 18.4% to 2.86 million bags, with arabica specifically down 10% year-over-year. That's a pretty sharp pullback.

The supply side is getting mixed signals though. Brazil just raised its 2025 production forecast to 56.54 million bags, which is more supply coming. But Vietnam's jumping in with 1.58 MMT of 2025 exports, up 17.5% year-over-year. Meanwhile, global coffee exports for the current marketing year are basically flat, down just 0.3% year-over-year to 138.658 million bags. USDA's forecasting world production at 178.848 million bags in 2025/26 - a record - though arabica production is actually dropping 4.7% while robusta's jumping 10.9%.

Weather in Minas Gerais is another factor - they got 33.9 mm of rain last week, which is only 53% of the historical average. That tightness could help arabica prices if it continues. The real question is whether these supply increases from Brazil and Vietnam overwhelm the tighter near-term inventory situation. For now, the arabica bounce seems to be holding on the currency strength and export slowdown.