Why do coffee prices fluctuate?

Navigating daily price fluctuations is one of the biggest challenges in green coffee buying. Knowing when to buy or contract coffee isn’t always clear. If you’ve bought green coffee over the past year, then you’ve noticed that coffee bean prices have swung from all-time highs in February 2025 to steep drops this past month. While these shifts can feel unpredictable, they’re ultimately driven by specific forces within the global commodities market. Given the recent volatility, we’re here to help demystify the “C” market and make you a more informed green buyer. Learn about what drives coffee price fluctuations and how the “C” market really works.

The “C” Market

First, let’s lay down the groundwork for how the commodity markets work. Since 2000, most financial and commodity markets have been operated by a major global company called the Intercontinental Exchange (ICE). ICE owns and operates several exchanges around the world, most notably the New York Stock Exchange. Today, we’re focusing on the Coffee “C” Contract.

ICE functions in many ways—they act as a trading platform, help buyers manage risk, and set the value of coffee based on a myriad of factors. Some of these factors are supply and demand dynamics, global economic trends, climate, production costs, and even things like geopolitical events and currency strength. They also maintain a network of warehouses where coffee is stored for the purpose of backing the value of coffee. Think of this as the coffee equivalent of the gold standard: in the same way gold backs a currency’s value, green coffee backs the “C” market value. When supply gets low at ICE warehouses, you generally see an uptick in coffee prices. When supply is plentiful, it’ll push the market back down.

Understanding Why Coffee Prices Fluctuate

There are two types of participants in any commodity market. First, there are commercial participants—these are the folks like exporters, importers, and sometimes distributors and coffee roasters who buy contracts for containers of coffee purely because they need the product. Then, there are non-commercial participants—these are your hedge funds, index funds, and speculators who buy contracts as investments to hopefully sell them at a profit, rather than actually receive coffee shipments.

These two groups share a crucial, symbiotic relationship. In a market where value constantly fluctuates, commercial buyers face significant exposure. To protect their investments, they rely on non-commercial buyers willing to take on that risk in exchange for potential profit. This process is called hedging; it lies at the core of why coffee bean prices fluctuate in the first place. Let’s take a look at how it works.

Example 1.

When you purchase coffee from overseas, it’s generally exported in 20ft. cargo containers, roughly equivalent to 37,500 lbs. Say you want to purchase a full container of coffee directly from a producer. The market is at 3.0000 ($3/lb.), and the producer is offering you a container of coffee at market level. You like the price, and you know your customers will like the price, so you go ahead and purchase the contract for a full container of coffee at $3/lb.

The next day, Brazil announces that they expect to have the largest crop they’ve ever seen and that their export volumes will rise significantly compared to what analysts previously expected. That type of news has a major impact on the value of coffee, and consequently, the market level. If a coffee-producing powerhouse like Brazil is going to flood the market with more supply than there is demand for, then the principles of supply and demand dictate that the value of coffee will decrease.

So the day after you buy your coffee, you wake up to find that the market has fallen $0.25/lb. You now own that coffee $0.25/lb. higher than its current value. There are 2 ways to go forward. Option 1: You sell your coffee for more than it’s worth, which is an uphill battle. Option 2: You take a $0.25/lb. loss on the 37,500 lbs. of coffee you just bought before it even ships out from origin.

While this is a heavily exaggerated example, it is a very real scenario buyers may find themselves in if they don’t protect their investments. To avoid this, we hedge our coffees.

Example 2.

Now let’s take a look at that same scenario, only this time with a hedge on your coffee.

You buy your 37,500 lb. container at $3/lb. like before, but that isn’t the end of your purchase. This time, you immediately turn around and sell that contract to an investor through a trade house with the intent to purchase it back once you’ve sold the coffee to your customers. At this point, your coffee is officially hedged, and you’re no longer tied to any specific market level.

This investor doesn’t actually want your coffee. They’re buying the contract from you because they hope that the “C” market will rally. If it does, then they can sell if back to you at a higher level than what they originally purchased. While they have your contract, you’re free to start selling coffee to your clients. However, you can sell it at whatever level the “C” market is trading at, because once you’ve sold all your coffee, you’ll buy the contract back from the investor at the current market level, which is known as “lifting a hedge.”

If the market falls $0.25/lb., you can now sell your coffee for $0.25/lb. less without taking a loss. When you buy that contract back, you’re ostensibly buying it back in a $2.75 market instead of a $3 market.

Navigating Coffee Prices

The reality is that exporters and importers don’t buy just one contract at a time, and they aren’t waiting until they’ve sold a specific coffee to left their hedge on it. It happens on a much larger scale with a much larger volume of contracts. As importers, we’re constantly buying and selling contracts to keep our coffee bean prices in line with the “C” market. This kind of mechanic is crucial to making sure that the farmers who put their hard work into producing great coffee are paid fairly, as well as allowing importers and exporters to always sell at fair market value.

While the “C” market can seem complex, its mechanics are essential to understanding how coffee moves from producer to roaster. Price fluctuations aren’t just numbers on a screen. They reflect real supply, real demand, and real people making decisions in a dynamic global system. Volatility may be unavoidable, but the right tools and knowledge can help you manage risk and stay competitive. The more you understand the market, the better positioned you’ll be to buy with confidence, no matter where coffee bean prices go next.

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