A trader’s guide to coffee

What is coffee trading?

Coffee is an agricultural soft commodity that’s traded physically and via derivatives such as futures, options and CFDs. It’s produced primarily in emerging markets located close to the Equator, due to the high temperatures and large amounts of sunlight required for coffee farming. Brazil is the largest coffee-producing country in the world, followed by Vietnam, then Colombia, Indonesia and Ethiopia.

Meanwhile, demand for coffee comes mostly from wealthy economies located in the Northern Hemisphere. The United States imports more coffee than any other nation, followed by Germany and France, then Italy and Canada. These countries have some of the strongest currencies in the world, making coffee a highly lucrative market for farmers, distributors, retailers and traders.

Arabica (Coffea arabica) and robusta (Coffea canephora) are the two main types of coffee that are commonly traded. Arabica makes up approximately 60-70% of coffee trading while Robusta accounts for approximately 30-40%.

What is the price history of coffee?

The coffee trading price history is volatile, with significant deviations in the price movements of arabica and robusta.

Arabica price history

Arabica coffee has experienced several sustained uptrends and downtrends, interspersed with periods of high volatility and market indecision. Many of its larger trends closely correlate with industry-specific events as well as broader market sentiment.

The 1990s began with relatively stable prices, but the latter half of the decade saw the onset of what became known as the ‘coffee crisis’. This period was marked by a prolonged downturn in coffee prices, influenced by overproduction and the collapse of the International Coffee Agreement's quota system. The crisis extended into the early 2000s, with prices reaching historic lows that severely impacted coffee farmers worldwide.

The early 2000s saw a gradual recovery from the coffee crisis, with arabica slowly climbing back from its record low. However, this period was characterised by increased volatility, with prices fluctuating in response to various factors such as weather conditions in major producing countries, changes in global demand and currency fluctuations.

A combination of poor harvests in major producing countries and increased global demand contributed to a significant price surge between 2010 and 2011. However, this was followed by a sharp decline from 2011 to 2013 as supply improved and global economic conditions softened. Prices surged again in early 2014 due to severe drought conditions in Brazil, the world's largest arabica producer.

The latter half of the 2010s was a period of relative indecisiveness, with prices generally fluctuating within a more defined range. However, arabica remained sensitive to weather events, crop forecasts, and global economic conditions.

The Covid 19 pandemic initially caused a sharp drop in coffee prices due to reduced demand and logistical disruptions. However, as the world adapted to the new normal, coffee consumption rebounded. Subsequent supply chain issues and adverse weather conditions in key producing regions coincided with significant price increases.

By 2024, arabica prices had reached multi-year highs, reflecting ongoing supply concerns and robust global demand.

Robusta price history

Robusta coffee, known for its stronger, more bitter taste and higher caffeine content, often trades at a lower price point than arabica and its price movements often follow similar broad trends, albeit with less volatility.

Robusta remained more stable than arabica during the ‘coffee crisis’ in the late 1990s, which provided some producers with a more reliable, if lower, income stream. Robusta was less affected than arabica by the collapse of the International Coffee Agreement's quota system, partly due to robusta’s lower price and different market dynamics compared to arabica.

Mirroring the broader coffee market, robusta prices gradually recovered in the early 2000s as demand from emerging markets increased, particularly for instant coffee, often made from robusta beans. Espresso drinks were increasingly popular in Western markets during this period as they are often blends containing robusta for added strength and crema, contributing to more demand.

Robusta rose gradually in the first half of the 2010s, influenced by increasing global demand from China and India and production challenges in major producing countries. Arabica’s uptrend was more significant, and robusta saw greater volatility, with weather in Vietnam adversely impacting production and pushing prices down. The robusta market was indecisive during the latter half of the 2010s with prices fluctuating within a more defined range. This was influenced by stable production in Vietnam and Brazil, recovery from the 2008 financial crisis and currency fluctuations in Brazil.

The Covid 19 pandemic initially coincided with reduced demand and logistical disruptions for coffee, which contributed to a large decrease in robusta prices. Coffee consumption rebounded as the world adapted to the new normal, which, with supply chain issues and adverse weather conditions in coffee producing regions, contributed to price rises.

By 2024, robusta had reached historic highs, rising to its highest price in 29 years. These unprecedented price levels were driven by supply constraints in major producing countries, climate change impacts, such as droughts in Vietnam, and increased production costs.

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What factors might influence coffee prices?

Coffee prices are influenced by a variety of factors, such as broader market trends and conditions in major coffee producing countries, such as weather and political climate.

Climate and weather – coffee plants need a tropical climate to grow healthy. Arabica plants can suffer from heat stress if temperatures rise above 24°C or from frost damage if they fall below 18°C. Robusta plants are more heat-tolerant, requiring a range of 22–30°C. Additionally, both plants require a specific amount of rainfall and humidity to thrive. Adverse temperature or weather conditions could reduce the supply of coffee, influencing the price to rise. Conversely, sustained positive growing conditions could boost supply and lower prices.

Political stability – many coffee-producing countries have experienced political instability and conflict in recent history. For example, the 2020–2022 Tigray War correlated with a significant arabica price increase. Civil unrest could lead to infrastructure damage, disrupting coffee production and obstructing supply chains, potentially causing prices to increase. Conversely, peace and stability could influence coffee prices to decrease.

Consumer habits and seasonality – the majority of the largest coffee importers are wealthy countries in the Northern Hemisphere. While coffee can be enjoyed hot or cold, demand often increases during the autumn and winter months when consumers are looking for hot drinks or gift-shopping, influencing prices to rise. Most harvests are complete before these months, which can boost market confidence in coffee futures.

Energy prices – the geographical difference between major coffee producers and consumers is often vast. Germany is the second largest importer of coffee, and Brazil, the largest coffee producer and exporter, is located thousands of miles away across the Atlantic Ocean. Transporting coffee over such long distances relies on fuels like diesel refined from crude oil. Coffee prices can be influenced by crude oil prices, due to the amount of fuel required to transport coffee over large distances.

US dollar strength – coffee is predominantly traded in US dollars on the global market. Fluctuations in the forex value of the US dollar can move coffee prices by affecting international purchasing power. A stronger US dollar makes coffee more expensive for buyers using other currencies, which could reduce demand and influence prices to decrease. Conversely, a weaker US dollar makes coffee more affordable internationally, potentially boosting demand and increasing prices. A strong US dollar could also increase local currency revenues from exports for coffee-producing countries, encouraging higher production and affecting supply dynamics.

What are the coffee trading hours?

Coffee is traded on different exchanges, each with their own trading hours.

Arabica is traded on ICE Futures US. Its trading hours are Monday to Friday, from 9:15am to 6:30pm UTC. Pre-market trading begins at 1:00am UTC.*

Robusta is traded on ICE Futures Europe. Its trading hours are Monday to Friday, from 9:00am to 5:30pm UTC. Pre-market trading begins at 1:00am UTC.*

If you choose to trade CFDs, you can follow coffee performance live in US dollars with our comprehensive Arabica price chart and Robusta price chart.

Monitoring the commodities’ activity can help you to keep an eye out for any key fundamental or technical events that may affect short-term movements in its value.

*Trading hours may differ depending on national holidays.

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How to trade coffee

Coffee is a commodity that can be traded on spot markets or through derivatives, financial products that derive their value from the underlying asset’s price.

For physical contracts, traders face significant costs and logistical challenges, such as storage fees and delivery obligations, which can create financial strain. To avoid these complications, many traders use derivatives like CFDs or futures.

Contracts for difference, or CFDs, allow traders to speculate on the price of coffee without owning the asset. You can go long (expecting price increases) or short (anticipating price decreases), using strategies like technical analysis to understand price action. CFDs also typically involve leverage (also known as margin trading), which enables larger positions with smaller upfront capital. However, leverage also amplifies potential losses, making CFD trading risky.

Learn more about trading commodities with Capital.com in our comprehensive guide to commodity trading, and get to grips with key concepts with our trading essentials page.

Aside from CFDs, traders can use other instruments like coffee futures trading, coffee options, ETFs and mutual funds to gain exposure to coffee prices. These alternatives offer different risk profiles and suit various investment strategies.

Lastly, traders interested in coffee may also look into shares issued by publicly traded companies involved in coffee production, distribution and retail – such as Nestlé, Starbucks and Keurig Dr Pepper.

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