Welcome to our latest edition of Market Watch! Andrew Blyth & Tom McLaughlin are here to provide you with the latest insight into the continuously rising coffee “C” market price and more as of February 2025.

Coffee Price Rises Higher

Coffee prices continue to have shocking upward momentum. As of Tuesday (2/11), prices made all-time market highs for 19 trading days in a row, bringing a newfound complexity to our industry. The ICE KCH’25 Futures contract traded as high as $4.3795/lb. on Tuesday, and the market shows few signs of slowing down. Keep in mind: before this year, the all-time futures price was $3.3750 back in 1977.

Why is the price of coffee increasing?

As we’ve discussed, there are many reasons we now see prices at these levels. The biggest contributing factor to the rise in prices over the past couple of years stems from weather issues and concerns of weather issues in coffee-producing countries. Vietnam, the largest producer of robusta coffee, saw subpar yields during the past few growing seasons. Following the issues in Vietnam, the market had another weather concern from the largest producing country, Brazil. Watching the news closely and participating heavily, is the investment community causing this market to rise faster and climb higher than anyone thought was possible.

Now, the driving force behind the recent price explosion is last year’s drought news in the coffee-growing areas of Brazil. Record-breaking temperatures and prolonged dry conditions have raised concerns about the upcoming May and June harvest. This has caused the coffee market to behave similarly to the Cocoa futures market, which has been impacted over the past 18 months by drought conditions in the Ivory Coast (the largest producing region for cocoa beans). Non-commercial traders, i.e., Wall Street hedge funds and managed money commodity funds that participate in markets solely on technical factors, have viewed the coffee market as the next “Cocoa market.”

These Index funds and commodity funds currently control over 40% of the Open Interest in the Coffee Futures markets, a percentage unheard of. The financial power of these funds has overwhelmed the coffee industry, and their long position only continues to grow. This has left the physical trade (origin, exporters, importers, roasters, and all of our customers) struggling to keep up.

What happens next?

Although it will take some time, the cure for high prices is, in fact, high prices. In high markets, origin countries have historically looked at these high prices as motivation to increase output. Unfortunately, this is not an overnight cure. Newly planted coffee typically takes 3 years to produce. However, the other solution to a high market is the one we all want to avoid: demand destruction. All of us on the importing & roasting side of the trade fear how this market could change or erode the consumers we work so hard to serve.

What does this mean for you?

As of today, we have seen an inspiring resilience from the specialty side of the roasting trade, but it’s too soon to tell what could happen next. We know we’ll continue to see extreme price volatility, though one must wonder if this market has gone way too high and too fast. We think it has, but we also struggle to see the path lower. Damage to Brazil’s next harvest is unknown, participation from Wall Street remains aggressive, and few roasters have mid-to-long term forward coverage of fixed coffee, all factors paving the way for this market to keep breaking records.

Oddly, roaster participation has been strong the past couple of weeks. This is attributed to fear of the unknown, wondering how high can/will this market go. Most roasters we encounter have and will continue to increase prices. As of late, the popular strategy is to roll out a price increase and match off fixed green coffee against it, allowing for stable pricing/margin for a fixed period, usually 2–6 months. While these final prices are shocking, they create a clear path forward for retail and wholesale pricing as well as a temporary respite for the daily climb of this market.

Want to discuss further? Need a partner to help with a plan? We are in this coffee ether just like you, and we’re here and ready to help, same as we’ve been for the past 30 years—just give us a call.

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