Coffee price forecast: 2025-2030 third-party coffee target

What is coffee?

Coffee is one of the world’s most widely consumed beverages and a significant agricultural commodity. It’s cultivated in tropical regions and primarily comes in two varieties: Arabica, valued for its smooth flavour and traded with us as US Coffee, and Robusta, known for its higher caffeine content and traded with us as Coffee UK. 

With prices influenced by global supply and demand dynamics, coffee offers CFD traders diverse opportunities to engage in one of the most active soft commodity markets.

Coffee has seen a notable 2024 bull market, with recent developments influencing coffee prices including:

• Weather sensitivity – coffee production is highly vulnerable to extreme weather events like droughts and frost, especially in key producing countries like Brazil and Vietnam.

• Rising global demand – growing coffee consumption, particularly in emerging markets, has driven steady demand.

• Supply chain disruptions – shipping delays, labour shortages, and geopolitical tensions have created bottlenecks, adding to price volatility.

• Sustainability trends – increasing consumer focus on sustainable and ethically sourced coffee is impacting production costs and pricing.

• Currency fluctuations – coffee, traded in US dollars, is heavily influenced by exchange rate movements, particularly for producers like Brazil.

Past performance is not a reliable indicator of future results. 

Coffee forecast for 2025 and beyond

For its coffee forecast for 2025, Citigroup raised its US coffee price estimate in November 2024 to $2.80 per pound, up from an earlier projection of $2.38. Looking further ahead, the bank expects prices to normalise to $2.65 per pound in 2026.

In its December 2024 forecast, ING predicted a full-year average price for US Coffee of $2.68 per pound for 2025, with quarterly averages of $2.80 for Q1, $2.60 for Q2, $2.50 for Q3, and $2.80 for Q4.

Warren Patterson, Head of Commodities Strategy at ING believes that restricted supply will have a big impact in 2025, saying: ‘With the global coffee market heading for a fourth consecutive deficit year and potential for a fifth in 2025/26, tight stocks and ongoing supply concerns are set to keep prices volatile and elevated, supported by backwardation in the forward curve.’

Coffee forecast: a contrary view

Conversely, World Bank analysis finds that US coffee prices are projected to decline by 8% in 2025 compared to 2024, with stabilisation anticipated in 2026.

John Baffes and Kaltrina Temaj, analysts at the World Bank, take a different view of production patterns in the coming months than Patterson, saying: ‘Arabica coffee prices surged by over 60% year-over-year in December 2024, but with global production projected to rise modestly, prices are forecast to decline by 8% in 2025, with further stabilisation expected in 2026.’

Trading Economics meanwhile, projected that coffee prices will reach $3.29 per pound by the end of Q1 2025 and rise further to $3.58 by January 2026.

Rich Asplund, analyst at Barchart also believes higher prices will prevail, saying on 24 January 2025: ‘Arabica coffee prices are surging on lingering supply concerns, with 2025/26 production estimates slashed by 11 million bags due to severe drought in Brazil. Global deficits are projected to widen, marking the fifth consecutive year of shortages, keeping prices elevated and volatile.’

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What drives the coffee price rate?

Coffee prices are influenced by a mix of global, economic, and environmental factors:

• Economic and monetary trends: GDP growth, employment rates, and manufacturing activity affect coffee demand. Low interest rates support consumption, while higher rates reduce disposable income.

• Production risks: major producers like Brazil, Vietnam, and Colombia face risks from natural disasters, such as droughts or frosts, and supply chain disruptions that can tighten supply and spike prices.

• Trade and geopolitical factors: export policies, tariffs, and currency fluctuations significantly impact coffee prices. A strong US dollar makes coffee more expensive for non-dollar economies, while a weaker dollar boosts demand.

• Market sentiment: speculation in coffee futures and rising costs of inputs like fertiliser and transport affect price trends. Positive sentiment around supply risks can drive prices higher, while oversupply can have the opposite effect.

• Environmental and sustainability factors: natural disasters and a push toward ethical sourcing add to production costs and impact pricing. Crises like pandemics or geopolitical instability also play a role.

Understanding these dynamics helps traders anticipate market movements and refine their strategies.

Historical coffee performance

 

Coffee has been traded for centuries, but its modern pricing story gained momentum in the 20th century. After the collapse of the International Coffee Agreement in 1989, coffee prices became more volatile, with sharp swings driven by weather, geopolitical factors, and supply-demand dynamics.

Coffee prices in this century

In the 2000s, US Arabica coffee futures, traded on the ICE (Intercontinental Exchange), surged from under $0.50 per pound in 2001 to over $3.00 per pound by 2011, driven by rising global demand and weather disruptions in Brazil. Prices dipped below $1.00 per pound in the mid-2010s due to oversupply but rebounded sharply in 2021. Severe frost in Brazil pushed Arabica futures above $2.00 per pound, marking one of the most significant price rallies in decades.

Recent performance

In recent years, US Arabica coffee futures have fluctuated between $1.50 and $2.50 per pound, but climate risks, rising production costs, and steady demand from emerging markets have elevated prices above this level in 2024. 

Here’s a graphic to show the big US Coffee moves of 2024 and what caused them. 

Past performance is not a reliable indicator of future results.
 

A: April 2024

Heatwave sends prices to record highs

Fears of global shortages due to extreme weather in Vietnam and Brazil send prices soaring. A prolonged heatwave in Vietnam damages robusta bean crops, while Brazil grapples with erratic weather impacting its coffee production.

B: May 2024

Overflowing stocks cool the market

Arabica and robusta inventories monitored by ICE reach their highest levels in a year and five months, respectively. This recovery in supply weighs heavily on prices, reversing the upward trend seen in April.

C: June 2024

Vietnam wilts, Brazil booms

Erratic weather in Brazil and a looming drought in Vietnam drive coffee prices higher. While Brazil’s robusta crop is booming, Vietnam’s production struggles, with exports expected to drop by as much as 20% compared to the previous year.

D: August 2024

The real weakens and prices fall 

The Brazilian real falls to a two-week low against the dollar, encouraging export selling by Brazilian coffee producers. This drives a wave of long liquidation in coffee futures, putting downward pressure on prices.

E: October 2024

EU regulation delayed: prices grind lower

The European Commission delays the EU Deforestation Regulation by 12 months, easing fears of supply-chain disruptions. Improved production data from Brazil and rising global coffee exports further contribute to falling prices.

F: November 2024

Supply fears cause 47-year highs

Supply fears in Brazil and Vietnam, coupled with anticipation of the EU Deforestation Directive, drive prices to levels not seen in decades. Concerns over production disruptions in key growing regions fuel the rally.

G: December 2024

Profit-taking spurs a sharp drop

Following the record highs of November, both markets experience steep declines as traders engage in profit-taking.

H: December 2024 (mid-month)

Shrinking crops, rising demand 

Bad weather in Brazil and Vietnam, combined with growing global demand, raises expectations of reduced coffee production, pushing prices higher once more.

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Coffee trading strategies to consider

Developing a robust coffee trading strategy aligned with your goals, experience, and risk tolerance is crucial for managing the price fluctuations common in soft commodity markets. 

A well-thought-out strategy can help you open, manage, and close positions effectively while minimising potential losses. Coffee traders often combine technical analysis with fundamental insights to pinpoint optimal entry and exit points.

1. Technical strategy

Technical strategies for coffee rely on chart indicators to analyse price movements, identify patterns, and generate trading signals. For instance:

• Moving averages can help traders identify trends and confirm potential reversals in coffee prices.

• The RSI (relative strength index) indicates whether coffee is overbought or oversold.

• Fibonacci retracements assist in identifying potential support and resistance levels.

These tools enable traders to interpret historical price data and anticipate future movements in coffee markets, which are known for their volatility due to weather events and crop cycles.

2. Price action trading

Price action trading focuses on analysing historical coffee price movements to predict future trends. Examples include:

• Monitoring key psychological levels, such as $1.50 or $2.00* per pound for Arabica coffee.

• Observing candlestick patterns, such as engulfing patterns or pin bars, to make trading decisions.

This strategy is popular among short-term traders, as coffee prices often experience sharp fluctuations due to seasonal changes and unexpected market shocks.

3. Trend trading

Trend trading involves taking long-term positions based on the direction of coffee prices. Traders may choose to:

• Go long during price uptrends driven by poor harvests, rising global demand, or unfavourable weather conditions like droughts in Brazil.

• Short coffee during downtrends caused by bumper crops, oversupply, or decreased demand from major importers like the US or Europe.

Fundamental factors, such as changes in coffee production in Brazil or Vietnam and shifts in global consumer behaviour, are crucial for this strategy.

4. News trading

News trading attempts to capitalise on market-moving events that influence coffee prices. Examples include:

• Weather events: Frost or drought in major coffee-producing regions like Brazil can reduce supply and drive prices higher.

• Economic data: Rising demand from countries like China or India may indicate higher global coffee consumption.

• Policy changes: Export restrictions or subsidies from producing countries can significantly impact prices.

Staying updated on coffee market news and analysis is essential to implement this strategy effectively.

5. Range trading

Range trading focuses on identifying support and resistance levels where coffee prices tend to fluctuate. For instance:

• Support level: Prices near $1.40 per pound,* where coffee may be considered undervalued.

• Resistance level: Prices approaching $2.00 per pound,* indicating potential overvaluation.

Tools like Bollinger Bands can help traders identify these levels and execute buy or sell orders accordingly, taking into account coffee's historical price patterns.

6. Breakout trading

Breakout trading targets opportunities when coffee prices move outside established ranges, signalling potential volatility. For example:

• Entering long positions when prices break above $2.00 per pound,* driven by supply shortages or geopolitical disruptions.

• Entering short positions when prices fall below $1.40 per pound,* triggered by oversupply or weaker demand.

Breakouts often occur around major harvest periods or after significant market announcements.

7. Fundamental trading

Fundamental trading in coffee focuses on analysing supply and demand dynamics rather than relying solely on technical indicators. Consider:

• Going long on coffee during periods of adverse weather or rising global demand, such as peak holiday seasons.

• Shorting coffee when oversupply from top producers or weak global economic growth affects prices.

This strategy requires a deep understanding of macroeconomic trends, weather forecasts, and agricultural reports.

*Price ranges at key levels are subject to change based on fluctuating market dynamics.

Additional trading insights

• Diversify your strategies: Instead of relying on a single approach, use a mix of strategies based on market conditions. For example, trend trading might be effective during harvest seasons, while range trading could work in stable periods.

• Risk management is key: Use stop-loss orders and proper position sizing to protect your capital. Even with strong strategies, coffee’s volatility can lead to significant losses without risk controls.

• Stay educated: Keep up-to-date with market trends, global coffee reports, and economic indicators. Engaging with expert analysis or attending commodity trading courses can enhance your skills and knowledge.

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