Coffee futures have been on the rise since late 2024. Arabica prices reached record highs before running into a sharp decline.
The market’s recent surge has been driven by supply constraints, extreme weather conditions in Brazil, and speculative buying.
However, a recent sudden pullback highlights uncertainty surrounding future price movements.
Source: Daman Markets MetaTrader 5
Behind The Surge
Coffee Arabica futures rose more than 6% on February 10, almost reaching 43,000. Coffee Arabica has been rising for 13 sessions straight, sparked by supply concerns in Brazil.
Farmers delayed sales of coffee due to the rising prices. The ongoing supply chain disruptions along with increased production costs added pressure to the coffee market. As a result, traders and roasters went into panic buying, which is another factor in the price surge. This has made coffee a volatile commodity to trade in recent weeks. ⁽¹⁾
The rise in coffee futures prices is beginning to impact consumer expenses, with the cost of roasted coffee increasing by 2.5% and instant coffee jumping by 7.1% in January. Companies are managing price adjustments to reduce the rising costs of coffee. ⁽²⁾
Although some traders think the price increase is resilient and not in line with fundamentals, others predict that costs will keep rising unless Vietnam or Brazil produce an abundance of crops, which isn’t expected until August 2026, or demand decreases due to the price hikes. ⁽³⁾
The Sudden Pullback
After a major uptrend, coffee futures pulled back on February 11. The pullback was caused after almost reaching 43,000 where profit taking took place which caused traders to enter long trades at discounted prices. ⁽⁴⁾
Supply disruptions is still causing concerns on supply chains, but the rapid rise in prices may have triggered a temporary correction. Additionally, some traders expect that increased price volatility could eventually lead to a decline in demand.
Industry Impacts
The surge in coffee prices have caused disruptions in the coffee industry. Central do Café, a coffee merchant in Brazil, suspended operations due to financial concerns caused by high coffee prices. ⁽⁵⁾
The coffee merchant is trying to manage its debts and restructuring operations, indicating the financial concerns that coffee companies are facing due to rising prices. ⁽⁶⁾
What’s the Outlook Like for Coffee Prices?
Futures traders are predicting that coffee prices could see a decline by the end of 2025. A poll from Reuters indicates that coffee futures could collapse by as much as 30% due to weakening demand and the prospect of a large Brazilian crop next year. ⁽⁷⁾
If weather conditions remain stable and farmers raise sales in response to high prices, the market could potentially correct. At the same time, external factors like currency fluctuations, inflation, continued supply chain disruptions and tariffs might still refuel volatility.
