Market Report

21 January 2026

This week, coffee futures basis the most active March contract fell 13.75 US cents per lb to 346.5 US cents per pound as of Tuesday. I wrote last week that I expected the market to go down to 350 cents/lb before finding more significant roaster support. This is broadly what happened. The index rebalancing period is now complete, with Index buying a net of 1.050 lots, a virtual nonevent. Overall, negative macroeconomic forces are converging on the coffee market at the same time as Central American origins find themselves at the peak of harvest and without significant demand. As a result, coffee differentials, or premiums (or discounts) to the futures price for some origins like Honduras, have dropped drastically. This indicates an increasing possibility of more coffee arriving to be graded as exchange stocks. Recovery of exchange stocks is critical because it will showcase to non-physical coffee participants that Arabica coffee is, in fact, in a surplus and doesn't warrant the current extreme backwardation that is priced into the market. Once backwardation eases, origin will find it easier to sell coffee farther in the future, promoting more market liquidity overall. Meanwhile, however, the market will be testing a critical support level around 340 this week that, if broken, can send futures to 325 and back up to 350 if the support level holds. 

14 January 2026

This week, coffee futures basis the most active contract fell 3.3 US cents per pound from Monday to Monday to 356.05 basis the most active March contract. I wrote last week that I expected the upward-trending market to continue, perhaps finding origin selling between $3.70 and $3.75 per lb. This is broadly what happened on Tuesday and Wednesday when the market touched a high of 383 on the week, before sharply reversing course. Thursday saw a sharp reversal with the market collapsing 14.7 cents on the day. Several large shifts occurred in the market. Most importantly, indications from Honduras came that exporters have had trouble finding buyers for coffee that is approaching the peak of harvesting for the 25/26 season. With the financial constraints additionally imposed on exporters in the form of higher coffee prices, high interest rates, and an extremely punishing spread (price difference between March and May futures), many are left with no choice but to sell it to buyers of last resort. These buyers are trade houses that have the knowledge to deliver certified coffee to the ICE exchange. Certifying coffee to the ICE exchange sends two very important signals to the market. First, it signals an increase in nearby available, highly transparent supply. Second, it showcases that perhaps there is a surplus of Arabica globally, or at least that the current market conditions prohibit some coffees from being used immediately. Ultimately, the devil is in the details as to how much coffee will come and when, but this shift is important to note by itself. This week, I expect coffee futures prices to start heading lower once Index rebalancing is concluded, ending the week closer to 350 than 360. 

7 January 2026

Happy New Year to all! This week, this year’s coffee futures prices have started on the ascent, rallying 7.2 cents from Monday to Monday to start the first real trading week of the year at $3.59 per pound. The main drivers behind the rally are investors coming back into coffee after a lackluster holiday season. Overall, the updated COT showed speculators reduced their positions by 52% since mid-November (15k lots). Additionally, my calculations indicate that the annual index rebalancing period for coffee will result in around 4000 lots of additional buying. I wrote 2 weeks ago that perhaps the 340 support would get tested, which it did around Christmastime. However, since then, the market has firmly bounced back into the 350's, which prevents large momentum signals from hitting the sell button further. In all, I would expect this week for the upward trending market to continue, perhaps finding origin selling between $3.70 and $3.75 per lb.

24 December 2025

This week, coffee futures prices basis the most active March contract fell 4.75 cents per pound from Monday to Monday to finish at 347.35. Last week, I wrote that I expected the market to go down to 350 cents/lb before finding more significant roaster support. It seems that this support level was broken as momentum and technical failures took prices down to a low of 339 before the market could find a nearby floor. Roaster buying had indeed been heavy, but as is typical during the second half of December, overall trading volumes have been thin. This week, the expectation is that the negative nearby technical picture continues to take the market slowly lower as longs take profit on the year and try to avoid any last-minute losses. Therefore, my expectation is for the market to continue to oscillate in the 340 to 355 range on the week, finishing perhaps at an attempt to break below the 340 support.

17 December 2025

This week, coffee futures prices basis the most active March contract fell 8.45 cents from Monday to Monday to finish at 360.3 US cents per pound. I wrote last week that I expected the bullish structure of the market to support the 370-390 range for the week. Instead, it appears that continued pressure from the origin to price newly harvested coffee inventories has emerged ahead of overall market concerns regarding nearby supply tightness. The market now faces two major technical support points at the 100d and 200d moving averages that, if broken, will initiate additional selling from momentum traders. On top of this, our team has concluded their crop tour in Brazil and has increased their production outlook for the 26/27 crop. Overall, we see production at 49.7m bags Arabica and 25.9m bags Robusta for the 26/27 season, with both Cerrado and Rondonia expected to produce record amounts of coffee. Weather conditions continue to be nearly ideal for all regions. It is important to note that the pressure from this crop will likely only come in Q2 of 2026, but it can be significant in altering perceptions of the future supply of coffee. This week, I expect the market to go down to 350 cents/lb before finding more significant roaster support.

10 December 2025

This week, coffee futures prices basis the most active March contract fell 7.25 cents from Monday to Monday to end at 366.2 US cents per pound. I wrote last week that I expected prices to continue to trade in a 370-390 range, and the expectation was largely correct before Monday tested the lower limits of the range. The market continues to be pitted against a nearby tightness situation showcased by the extreme inversion in nearby contracts and depleting certified inventories. However, on the latter point, it seems that we have turned the corner with more gradings showing up each day. While stock continues to be low in certified inventory, the almost official postponement of the EU deforestation regulation will make it much easier to bring coffee to the exchange in Europe in 2026. These factors, combined with what seems to be sluggish demand from the roaster so far for Q1, make for resetting the range lower at 360-380 for this week. 

3 December 2025

This week, coffee futures prices basis the most active March contract rose 3.15 cents from Monday to Monday to end at 379.7 US cents/lb. I wrote last week that the market would trade in a 370-390 range again, as technical support signals around 370 are firmly held. Over the past week, the market has seen a significant reduction in volumes and volatility. On one hand, hedge pressure from producers (largely Central America, which is entering peak harvest) creates negative pressure on the market. However, on the other hand, roaster buying seems to emerge on any significant downward price action to keep the market propped up. Indeed, the buying interest from US roasters, especially, has been notable as they already are receiving a 40 cent or so "discount" from just a few weeks ago due to the tariff alleviation. The nearby spread of December March trading at +31 in its delivery window serves as a staunch reminder for roasters to fix their nearby March positions before the situation escalates. Indeed, participants remain fixated on the availability of nearby Arabica ICE certified inventories. Until significant replenishments are made to these inventories, spreads will remain at elevated levels, keeping the overall bullish structure of the market intact. Therefore, I expect the same for this week, with prices trading in the 370-390 range.  

26 November 2025

This week, the coffee futures basis the most active March contract fell 0.05 cents from Monday to Monday, ending at 376.55 US cents/lb. Last week, I expected the market to trade in a 370-390 range as the December contract went into delivery. Overall, 4 participants are taking delivery of December coffee futures at a record level of inversion this century (+31 at the time of writing). This means that traders are willing to pay a roughly $21 million premium to take coffee in the nearby contract, in-store US and Europe vs. buying coffee and shipping it to the destination against the March contract. This places a significant bullish undertone to the market that has largely negated the most important announcement so far in Q4, which was the alleviation of US tariffs on Brazilian coffee. The announcement of the 40% tariff being lifted came on Thursday and saw the market sell off 24 cents to $3.51 in the early trading hours on Friday. However, a large wave of roaster buying kept the market buoyant enough for the spread action to mount a massive reversal on the day. The market did enough to keep the technical chart patterns intact. Therefore, my expectations this week remain unchanged, with a 370-390 range expected again.

19 November 2025

This week, coffee futures basis the most active March contract fell 16.55 cents from Monday to Monday to end at $376.6 US cents/lb. Last week, I wrote that with the US Supreme Court looking unfavorably upon tariffs implemented under IEEPA, the Trump administration must now pivot its stance on "making deals" with other countries, making it less likely to give concessions to specific countries like Brazil to then have all tariffs become overturned by the Supreme Court. On Tuesday, the market reacted greatly to news of a forthcoming relief on coffee tariffs. News of relief on coffee were mentioned by President Trump in a nightly news interview on Monday and followed up mid-day by the US Treasury Secretary, citing possible exemptions soon to come for all commodities that cannot be grown in the United States. The result was a market selloff of 22.85 cents per lb, or 5.8% on the day. On Friday, the White House’s executive order put words on paper. All tariffs for coffee have been removed, with the exception of Brazil (40%). While that is a huge step in the right direction, the most important and punishing tariff for US roasters remains in effect. The US administration specifically held out on giving what it sees as a concession to Brazil in reducing the coffee tariff. Leaving the tariff open for negotiation suggests negotiations are valued and ongoing, but the overall impact on coffee from the reduction in all other tariffs is muted without Brazil in the mix. Therefore, my expectation is for the market to continue to trade sideways 370 - 390 this week as the December contract goes into the delivery period.  

12 November 2025

This week, coffee futures basis the most active March contract rose 6.45 cents from Monday to Monday to end at 393.15 US cents/lb. I had written last week that I expected the market to trend upward during this OI roll period, with a natural target for March futures of $4/lb. Indeed, that is what happened, as March futures tested highs of 398 and 396 on Wednesday and Thursday before selling off. The main headlines around coffee this week are the overall negative sentiment coming from the US Supreme Court as it reviews the legality of Trump's use of the International Emergency Economic Powers Act (IEEPA) for issuing tariffs. Three conservative justices on the nine-judge panel appeared skeptical during the hearing, leading most market participants to believe that most tariffs would be reversed by the court's ruling. The upside for coffee is that all tariffs would disappear overnight from the ruling and that likely the government will have to pay back all of the collected tariffs as well. However, the downside here is that the Trump administration must now pivot its stance on "making deals" with other countries, making it less likely to give concessions to specific countries like Brazil, to then have all tariffs become overturned by the Supreme Court. Therefore, the market is now stuck waiting until the Supreme Court makes a decision on IEEPA, which, given the prioritized nature of the case, should be sometime this year... This week, I project the market will continue to be impacted by the tightness in the December/March spread, with options expiry on Wednesday a key day to watch. Therefore, I see March continuing to trade in a 390-400 cent range for the week.

5 November 2025

This week, coffee futures basis now the most active March contract rose 17.75 US cents per pound to $387.7 cents/lb from Monday to Monday. I had written last week that I expected prices to collapse to around $3.50 a pound before finding support from the index roll period. Instead, prices only fell on Tuesday to a low of $359.2 before stabilizing throughout the week. I believe that strong roaster fixation for outstanding contracts in December was a large contributor to prices avoiding a more significant selloff. The week's end saw a new decline in ICE certified inventories, while the Index roll seemed to bring new focus on the record high inversion (difference between December and March contract). It's also important to note that there has been absolutely no movement on the part of the US administration regarding the alleviation of tariffs for coffee. Therefore, it is possible that any speculators who wanted to sell ahead of the deal "being done with Brazil" have become disappointed by Monday and were forced to buy back. This week, the tone of the market shifts fully toward the Index roll and the amount of coverage roasters still have in December futures. Over the past 18 months, the need for roasters to fix has far outpaced the need of origin to sell during this period of time (between Index roll and options expiry), which has been fully taken advantage of by speculative buy interest. While I do believe the situation for the roaster in terms of fixation is not as dire as in the past, the direction of the market is clearly upward during this OI roll period. Therefore, the natural target for March futures is $4/lb by the end of this week.

29 October 2025

This week, the coffee futures basis the most active December contract fell 14.5 cents from Monday to Monday, ending at 391.55 US cents per pound. I wrote last week that the price action depended largely on tariff announcements from the US Trump administration, with additional tariffs on Colombia leading to a breakout to new highs, and signs of relief resulting in a fallback below $4. The latter occurred, with US President Trump specifically mentioning the need to lower coffee prices following his meeting with Brazilian President Lula in Malaysia on Sunday. Most parties believe that relief on the tariff side will be forthcoming, removing a major undercurrent of near-term tightness in the market. On the production side, nearly ideal conditions have been observed in Brazil this week, adding additional calm to the 26/27 crop potential. We have also raised our outlook on nearby Vietnamese and Indonesian Robusta crops at a time when Robusta usage tends to peak seasonally. The continued price difference between Arabica being almost twice the price of Robusta is starting to weigh in on roaster choices in blends that have the capability to switch. As a result, nearby pressure on Robusta is increasing at the expense of Arabica. This week, I expect prices to collapse to around $3.50 a pound before finding support from the index roll period.

22 October 2025

This week, coffee futures basis the still most active December contract rose 13.9 cents from Tuesday to Tuesday, closing at 413.55 US cents per pound. My expectations were for the market to correct to 370 cents on the week as beneficial rainfall puts any worries regarding the upcoming Brazilian Arabica crop into the rear-view mirror. While we got the rains we expected, the main focus of the market was on the nearby availability of coffee. Certified stocks continued to draw on the week, showcasing again that coffee continues to be sold on the spot to satisfy nearby demand, primarily in the United States. On the government side, the current escalation between Colombia and the United States poses additional risks of tariff escalations with Colombia. The risks of punitive tariffs on the 2nd  largest US supplier of coffee (after Brazil) at a time when roasters are facing near record high prices will be absolutely detrimental to the US roaster. The near-term effect will be the need to find replacements on the already tight spot market, likely exacerbating the December-March spread currently trading at +23 cents. If the US were to announce an additional punitive tariff on Colombia and not exempt coffee from this tariff, the market would likely break the previous highs of 425 US cents/lb. However, if the tariff announcement can be delayed or coincide with potential negotiations on eliminating the punitive tariff on Brazil, the market will likely calm down to below $4.

14 October 2025

This week, coffee futures basis the most active December contract fell 17.7 US cents per pound to end at 373.60. Last week, I wrote that I expected the market to calm down and move toward 375 by Friday. This is exactly what happened. Increasing amounts of decertification of ICE certified inventories are having less and less impact on the market as it is well understood that at least the Mexican inventory portion of certified stocks (131k bags out of 509k total) will likely be sold by the end of this year. Certified stocks had reached a low of 224k bags as of December 2023, when the market was trading at 179 cents per pound, less than half of today's price. During the last several months there have been ample opportunities to buy at or below tenderable parity in Brazil. Furthermore, the possible delay or postponement of EUDR legislation would remove a significant impediment to certifying new inventories in Europe. I would argue it is more important to focus on future Arabica production to see if another deficit year can be prevented, resulting in a stabilization of the coffee market. As far as weather is concerned, rains fell across the main growing areas in Brazil late last week, as per the expectations of our weather strategist Greg Oddo (link to last weather update here). The main producing areas of Brazil saw 30+ mm of rainfall on a production weighted basis beginning last Wednesday. With another 35mm+ looking to come over the next 7 days, these rains will result in the fixations of the main flowering for the 26/27 Brazilian Arabica crop. General consensus is that the next crop will likely not be a record for Arabica, but will come close and beat the last 2 crop estimates by at least 5 million bags and will certainly put concerns over 131k bags of ICE certified inventories in the rear-view mirror. My expectation for this week is that the market will attempt to test 370 cents/lb this week and if broken will finish around 360.

7 October 2025

This week, coffee futures prices basis the most active December contract continued to rise 12.7 cents from Friday to Friday to end at 390.75 US cents/lb. I expected the market to continue to trade in a 360-390 USc/lb range this week, and we ended the week at the top of that range. The main drivers to the upside continued to be weather in Brazil and the decertification pace of ICE certified stocks. Regarding the former, our team believes we are in normal weather conditions but the market has gotten nervous on the nearby period of heat and dryness. We see rains appearing by middle of this week after several days of dry and hot weather, which helped to stimulate the main flowering event in Brazil. Per coffee agronomy textbooks, 3-5 days of dryness following a flowering is ideal as it allows cross pollination and drying out of the flower buds that then fixate to cherries so long as follow up rains come. Regarding the latter, ICE certified stocks indeed are drawing at a rapid pace and increase whenever prices fall on the futures market. Some trade houses have been seen explaining the need to decertify inventories in order to help support US roasters facing high tariffs. Certified stocks do have commercial value, especially in the US, but it is imperative to point out that using certified inventories has a significant outsized impact on prices and spreads. Overall, I expect the market to calm down this week and move toward 375 by Friday. 

30 September 2025

This week, coffee prices basis the most active December contract rose 11.55 cents week on week to end at $3.7805 USD/lb. I wrote last week that my expectation was "bullish speculators will continue running for the exits this week, and the market will find some eventual support around 335." What I wrote was partially fulfilled, with the market falling to a low of $3.50 on Tuesday night, with all technical indicators pointing lower. However, that evening, ICE certified stocks, representing roughly the inventory of last resort that is most closely tied to futures prices themselves, fell by 27,438 bags. Over the following 4 days, a total of 74,264 bags, representing a drop of 11.5% of total inventory, were removed in less than a week. While the timing looks suspect, it is possible that these coffees were removed in order to reduce inventory levels on trade house books to end the 3^rd financial quarter. In any case, the market took this news as extremely bullish and rallied 17.6 cents the next day. The volatile price action continues to showcase competing viewpoints in the market: on the one side, extreme nervousness regarding nearby availability of Arabica coffee; on the other, increasing confidence regarding the positive development of the next crop in Brazil. This week, weather forecasts will be the primary driver for price action, barring any new surprises in certified stocks. Overall, I would expect the market to continue to trade in a 360-390 USc/lb range this week. 

23 September 2025

This week, coffee prices collapsed spectacularly, falling 30.35 cents basis the most active December contract to end the week at 366.5 US cents per pound. I wrote last week that I would expect the market to try to make all-time highs, with a pullback to follow if it fails to do so. The market did exactly that, with the market rallying past $4 on Monday and going after the high set in February of this year on Tuesday. However, it failed to reach that high and settled with a turnaround day, 8 cents down and 15 cents off the high. Then, in the evening it rained in Brazil. Overall coverage was spotty, but thunderstorms were not expected by the market (though they were expected by Sucafina), and the most important coffee areas suddenly got 5-15mm of rain (which is generally sufficient to help ensure fixations of a small flowering). This amount was enough to put a damper on bullish expectations for excessive heat and dryness damaging the potential of the 26/27 crop. As a result of the rain, the market ran out of buyers and fell 33 cents on Wednesday, which is the biggest one-day market collapse since 1997 in cents/lb and since 2021 in percentage terms. Weather prospects for the weekend and next week improved in the second half of the week, leading to a general realization that the rainy season in Brazil is off to a textbook-ideal start. Therefore, the market continued to sell off on Friday, falling another 14 cents as farmers began throwing in the towel. My expectation is that bullish speculators will continue running for the exits this week, and the market will find some eventual support around 335.  

16 September 2025

This week, coffee prices basis the most active contract rose 23.2 cents/lb to 396.85. Last week, I had written that I expect the market to stay in a $3.70-$3.90 range as weather becomes increasingly critical to watch in Brazil, and we saw a normal seasonal return to rainfall. On the weather front, our team is seeing the return of the rainy season in Brazil coming this week to the main growing regions. However, the market broke out of the range on Friday, closing the week at $396.85. This means momentum trading will try to run the market higher, taking a shot at the all-time high in coffee prices set on February 13th of this year at 425.1 (though the market did trade up to 429.95 on Feb 11th). Nearby tightness on spreads adds fuel to the fire with ICE-certified stocks seeing 23 thousand bags of reductions on the week. The main focus this week will be on the return of rains in Brazil as well as macroeconomic flows in light of the Federal Reserve's meeting on Wednesday. I would expect the market to try to make all-time highs, with a pullback to follow if it fails to do so. 

9 September 2025

Last week, coffee futures basis the most active December contract fell 3.85 cents on the week to end at $3.74 per lb. I had written two weeks ago that we would see increased volatility where futures may try to test above $3.90/lb before crashing back below $3.50 at the end of the week. None of these extremes of the price range occurred throughout this 2-week period. The market did attempt to run higher, touching above $3.90 last Thursday before meeting meaningful resistance on the sell side. However, the market was also well supported below $3.70 with general investments into the commodity complex. Over the past 2 weeks, the Index category (roughly representing more passive money flows into coffee) added 2,093 lots of length and increased its coffee investment in dollar terms by $600 million. Index now holds the largest position in coffee since January of this year, before the main Index rebalancing event that happens mid-January. An increased investment from the index category is broadly affecting soft commodities, but interestingly not agricultural commodities. A sputtering stock market may also see reinvigorated flows into the index categories as investors look for alternative assets to park their money in Q4. However, as we move further into September, the weather is going to become increasingly critical to watch in Brazil. So far, our team is calling for a normal return of seasonal rainfall to Brazil, which should give the market more confidence about the potential of the 26/27 crop. Therefore, this week I expect the market to stay in a $3.70-$3.90 range.

26 August 2025

Last week, coffee futures basis the most active December contract continued its rapid ascent, rallying 44.10 cents from Friday to Friday to end at 378.3 USc/lb basis the most active December contract. I wrote last week that I expected speculators to push futures higher to 340 before more significant resistance was to be expected. Unfortunately, such resistance did not materialize and coffee futures continued to rally for 8 straight trading days, reminiscent of the rally in January and February when futures rallied for 12 days straight from $3.30 to $4.00. Roaster participation, as denoted by the Commercial Gross long category in the CIT report, increased 17% in the previous week ending on Tuesday, suggesting roaster panic and willingness to pay up to get December coverage on the books. Roasters are now closer to average levels of coverage for the season, suggesting that the nearby need for desperate buy orders is subsiding. Moreover, weather patterns in Brazil suggest a benign start to September. Lastly, with September futures now in the delivery period, it is likely that sentiment around inventories will calm down this week. Lack of liquidity in the market to the upside could be a double-edged sword once story-chasing and momentum buying pause, leading to a vacuum of buyers if someone were to attempt a reversal trade. Therefore, I believe that we will see a volatile week where futures may try to test above $3.90/lb before crashing back to below $3.50 at the end of the week.  

19 August 2025

Coffee futures basis the most active December contract rallied another 31.75 cents last week to finish at 334.2 USC/lb. The strongest price action came on Friday, which saw the strongest rally since February with a 15.5 cent gain. I wrote last week "with technical indicators suggesting a breakout in coffee futures, my expectation is for the market to settle around 325 USC/lb by end of this week. " This is pretty much what happened. Speculative investment flow on the back of Brazil tariffs setting in, combined with Brazilian producers holding off sales, worked in tandem to prop up the market.  Overall, Brazilian farmers remain sidelined, and differentials in Brazil show little sign of weakness. On the other hand, the Gross Commercial long position, a proxy of roaster coverage, was reported on Friday to be at the lowest level since 2011. Unlike producers, who (well-capitalized from record prices received last year) can hold onto coffee for as long as a year, roasters cannot allow their futures hedges to slip. Commercial gross longs typically increase from August to October, with 11 out of the last 15 years showing an average increase. Knowing that the roaster is likely going to need to buy December futures in the next 8 weeks gives speculators another reason to keep pushing coffee futures higher. With this in mind, my expectation is for the market to continue its ascent to 340 by end of this week, where more significant resistance is expected.  

12 August 2025

Coffee futures basis the most active December contract rallied a whopping 32.40 cents from Monday to Monday to end at 314.05 US cents per pound. The main driver behind the rally in the last week has been increasing pressure on coffee spreads as a result of the newly imposed tariff of 50% on all Brazilian imports coming into the United States. The Brazilian farmer, who holds the vast majority of their 25/26 crop (now completing harvest), is extremely well capitalized and is in no hurry to sell. However, many US based roasters had not truly believed that the tariffs were going to stay and are now forced to either accept a 50% increase in Brazilian coffee prices or be forced to slowly switch their coffee blends out of their biggest origin. In terms of desperation, the market seems to be slanted, once again, for the roaster to be forced to absorb as much pain as possible and come to the level where the Brazilian producer is willing to sell. This is well understood by speculative funds, who are now seeking to increase investment in luxury commodities that have inelastic demand with regards to price. Furthermore, the full fledged implementation of EUDR on Dec 31st forces once again a possibility of roasters in Europe over-accumulating spot inventory into year end to avoid hiccups with EUDR contracts. All of this is starting to be realized at the same time, with the only resolution being excess inventories coming in to be graded as ICE Certified stocks to alleviate perceived demand pressures. Until that happens, coffee futures prices lie at the whims of speculators, which news of cold weather doesn't seem to ease. On that front, August 11^th marked a cold scare in Brazil with very small damage reported in a single municipality in Cerrado. While our team is conducting an assessment, our belief is that the damage is superficial and will be limited to defoliated trees on some, high risk farms (coffee planted at the bottom of valleys). Nevertheless, with technical indicators suggesting a breakout in coffee futures, my expectation is for the market is to settle around 325 USC/lb by end of this week.  

29 July 2025

Coffee futures basis the most active September contract fell 6.05 cents per lb to 297.55 US cents/lb. Last week, I wrote that the market would come off into the $2.90 to $2.85 range before support emerged from roaster buying. While directionally I was correct, the main drivers of the market this week were increasing tightness on the front spread. The spread between September and December contracts started in July at a 5-cent/lb inversion and rose to 7.65 cents by Friday. Continued tightness in the spread is telling us that there is interest in nearby inventory, specifically the ICE Certified Arabica stocks largely available in Europe. With the 50% tariff on Brazil looming, it seems plausible that some of these stocks would have to eventually find their way to the US to supplement the roughly 800 thousand bags per month imports from Brazil that will soon be $1.50 higher for the roaster. The need to solve what seems to be the most ominous threat to at least the US coffee industry has paradoxically paralyzed roaster activity last week. The weather week by week seems to be more benign in Brazil, but reports of strong hailstorms affecting farms have emerged over the weekend. We always see hailstorms as extremely localized events that can be devastating, but in this case, they affected an estimated 1,500 Ha of coffee farms. This accounts for 0.2% of the region's acreage, so it is a non-factor in light of the total Brazil potential. The main driver in the market this week will continue to be geopolitical events, with trade deals and tariffs in focus. The market will likely continue to oscillate in a $3.10 to $2.90 range based on what news emerges from the White House. 

22 July 2025

Coffee futures basis the most active September contract, rallied 17.1 cents on the week to finish at 303.6 US cents/lb. Last week, I wrote that I expect futures to rally with key resistance expected between $3/lb and $3.05. Indeed, this is what happened as tariffs continued to buoy the conversation regarding the nearby supply of Arabicas. Moreover, some news of possible cold weather emerged in the forecast models for Brazil in the 11-15 day time frame. Normally, the least accurate time frame, the models hinted at a possible cold in the closing days of July and the beginning of August. At this moment, the risk has reduced for this cold, but models can continue to oscillate and bring weather volatility to the market. If weather is not a factor, the main focus will shift back towards the looming threat of a 50% tariff set on Brazilian coffee exports to the United States, which are due to take effect on August 1st. I believe that this week, the hope that this may get resolved is likely going to start to turn into panic from the roaster's perspective, leading to some sort of interest in finding alternative supply. Therefore, my prediction is that markets will come off this week back into the $2.90 to $2.85 range before finding roaster support. 

15 July 2025

Coffee futures fell 3.1 cents on the week to 286.05 US cents per pound basis the most active September contract. I had predicted last week that prices would trade in a broad range of 275 to 300 depending on US President's Donald Trump decision regarding reciprocal tariffs. The tariff announcements have gone to the worst possible extreme for the US coffee sector as Trump announced on Wednesday a 50% tariff on Brazil. The United States imports 7.5 million bags of Brazilian coffee over the average of the last 3 years, making it the largest coffee origin for coffee imports. 90% of this coffee is Arabica, making up roughly a third of the neutral and nutty flavor basket in traditional commercial coffee blends. At current differentials, the price of Brazil with the tariff increase from 10% to 50% goes up by 107 US cents/lb. The long-term impact on the competitiveness of US roasters is hugely detrimental. Moreover, the ruling will likely result in a major reformulation of blends, likely reducing consistency in flavor and increasing Robusta usage. Overall, I believe there is a significant incentive to incorporate more African coffees and Robustas, which would be bearish for Arabica futures in the long term. However, the rapid implementation of the Brazilian tariff will likely cause nearby supply tightness in US inventories as any pre-tariff coffee will find eager buyers in the short term. In the medium term, I have to note that the Brazilian harvest is now progressing past 50%, while farmers' commercialization pace is well behind the 5-year average. No roaster will want to secure bookings for Brazilian Arabicas now with the tariffs looming, and may even look for ways to get out of their existing contract commitments by swapping to substitutes. This will put additional pressure on farmers to sell their inventories at cheaper prices, perhaps even to the levels where it makes sense to rebuild ICE Arabica inventories in Antwerp. For next week, I do expect upward futures to rally with key resistance expected between $3/lb and $3.05/lb. 

8 July 2025

Last week, coffee futures continued their descent, falling 16.05 cents on the week to finish at 289.6 basis the most active September contract. I wrote last week that we will find strong roaster buying support at $3/lb with the market trading in a tight range of $3 - $3.10. Instead, the market pushed for a strong break of the $3 resistance level without major roaster buying seen. With the US in a holiday week, it seems that roasters were happy to let the market fall and come back to fix in the following weeks. On the producer side, it is clear that panic is starting to set in as Brazil is approaching the peak of harvest of the new 25/26 crop. Prices continue to be extremely attractive for coffee, even considering last season (futures averaged 236 US cents/lb throughout July 2024). Furthermore, it seems increasingly likely that the selloff may be driven more by commercial rather than speculator liquidation. Normally, a trade house owning a container of coffee maintains a futures short to offset the market risk of that coffee. However, maintaining a futures short in a rapidly rising market is expensive in terms of margin calls and the impact of the backwardation. Therefore, as an offset to a rapidly rising and extremely volatile futures price, some importers had selected to maintain partial hedges on their physical position. The risk of maintaining hedges less than 100% is a quieter, declining market environment, which reduces the value of inventory over time without a fully compensated gain on the futures side. At some point, the ratio of hedges needs to be restored to 100%, which I believe is determined by both a volatility signal and a price signal. $3 was likely the threshold whereby hedges had to be reinstated, leading to further corrective action in the market. However, this week we will have to shift our focus again to geopolitics. My forecast for this week is a broad range of 275 to 300 US cents per pound as news channels turn to the US and President Trump's decision regarding reciprocal tariffs, which he decided to postpone almost 90 days ago. 

1 July 2025

Last week, coffee futures fell 11.30 cents to a new annual low of 303.75 US cents per pound for the most active September contract by Friday. The week saw a potential for frost in Brazil, which brought a lot of volatility to the market early in the week. However, I had forecast a much higher potential upside of up to $3.50 prior to the frost, which did not materialize. In the end, the market found a high of 327.55 on Monday before collapsing on Tuesday and Wednesday as traders gained confidence that the cold front was not going to create a meaningful frost. Indeed, that was the case when the cold event finally occurred on Wednesday morning. Our team found very minor reports of damages to leaves in the far southern (fringe) growing state of Parana. In all, we believe that the agronomic damage from the cold is inside the margin of error for 26/27 production potential, so we will not adjust our production lower as a result of this event. Statistically we are not out of the frost season yet, as the peak risk period is the last week of July and first week of August. The downside price action on the week did suggest a significant amount of weather risk premium eroding out of the market that could still be put back on if forecasts trend colder. Therefore, my expectations for this week is that we will find strong roaster buying support at $3/lb with the market trading in a tight range of $3-$3.10. 

23 June 2025

Last week, coffee futures continued to fall lower, closing 30.25 cents down on the week at $315.05 USC/lb basis the most active September contract and making the new lows for the 2025 trading year on Friday. My view of a lackluster July first notice day resulting in a rangebound market around 335-350 has been largely unfounded, as a combination of continued momentum and desperate origin selling has pressured the market lower each day. It is clear that the tables are quickly turning from the roaster being in trouble and behind on futures fixation, to the producer holding a significant amount of inventory and desperately trying to fix prices. This week, however, there may be some respite from the downward price action. A cold front is arriving in Brazil Monday night, with the coldest night expected on Tuesday (Wednesday Morning). Currently, our team sees negligible risks to the main coffee growing areas, which, if proven true, would cap the rally and resume the downtrend by Wednesday. Therefore, I foresee the potential upside of this market to $3.50 depending on how spooked the market gets around the Brazilian cold event, before ending the week unchanged. 

17 June 2025

Last week, coffee futures basis the now most active September contract fell 9.45 cents from Friday to Friday, ending at 346 US cents per pound. I wrote last week that the market would continue to rally to 375 before stalling out. My expectation of that continued rally was largely unfounded. Though we did see an attempt to bring the market higher on Tuesday with a high set of 370.4, the market that day saw a massive turnaround from the highs and ended up trading lower on the day (marking a pattern called a key bearish reversal). The failure of the market to get any lasting support at 375 showcased the willingness of new shorts to enter the market. We are approaching the end of June without major issues in terms of cold weather on the forecast horizon in Brazil. Elimination of weather premium out of July contracts, an undersold Brazilian farmer, and the peak of Colombia's mitaca commercialization have now combined with technical charts crossing longer-term momentum signals to the downside. On the macroeconomic side, it seems that geopolitical risks arising this week from the Israeli strikes on Iran seem to be risk-off in terms of agricultural coffee futures, meaning more selling in markets where funds are long. While that could change if shipping channels of the strait of Hormuz or the Red Sea are affected, my view has flipped to a lackluster July first notice day with coffee futures hanging around a 335-350 range this week.

10 June 2025

Last week, coffee futures rose 13 cents from Friday to Friday to end the week at 355 US cents per pound basis the now most active September contract. I had written last week that roaster buying would prop the market up to 350. This broadly happened, but additional factors have led to a larger-than-expected rally. First, the index roll led to the movement of open interest out of the July contract into September. This year, the contract rolled from July to September at the earliest trading day in my historical analysis dating back to 1991. To me, this highlights the nervousness of traders to remain in the July contract. On top of this, ICE-certified stocks saw a 34 thousand bag decline on Thursday evening, which marks the largest decline since January of this year. Both of these factors suggest a market participant trying to instill fear into the market as we approach yet another first-notice day. Brazil Arabicas are still a few weeks away from reaching the official start of harvest, so hedging pressure is unlikely to be large. On the other hand, roaster coverage as represented by the Gross Commercial long, is 5,719 lots above its 2025 average. This suggests less trapped roaster longs waiting to fix the July contract. Therefore, my expectation is that the market will continue to rally to 375 this week before stalling out as we approach the last week leading up to the first notice day on Friday, June 20th. 

03 June 2025

Over the last two weeks, coffee futures have collapsed 23.2 cents to finish Friday (May 30) at 342.45 US cents per pound. I had last written my expectation for a 360-375 range as momentum selling intensified. Indeed, the first week heading into the US holiday saw the market hold that range and finish at 361 cents on Friday. Then, last week saw a broad spectrum of technical triggers cross into negative territory, initiating additional momentum selling that brought the market down an additional 18 cents. The low liquidity environment in coffee futures also meant that big momentum longs had to squeeze through a smaller door, so to speak, thereby moving the market more than expected. On the fundamental side of the market, things are quiet with weather in Brazil benign at the moment. All indications seem to point to an excellent quality crop in Brazil, but the peak of harvesting is still a month away. On the other hand, the pace of commercialization in Central America appears to be slowing down as most crops seem to be sold out. Without significant selling coming from origin and momentum sellers largely done selling for now, we would need another input to move the market lower. Therefore, my estimate is that roaster buying will prop up the market this week to 350.  

20 May 2025

Last week, coffee futures basis the most active July contract fell 22.1 US cents per pound to reach $365.65. I wrote last week that "I expect for us to trade in the 375-385 range, with some potential for momentum sellers to reengage to the downside, bringing prices another 10 cents lower if we were to break and hold below 375". This is what happened as Monday's selloff brought prices below 375 and Tuesday prices could not stage a rally strong enough to get us out of the downward trend. Momentum sellers engaged to the downside, bringing prices down to a low of 362 before Thursday's action saw another attempt to clear 375. After the second defense attempt, over 375 failed, the market came off again on Friday. The market is shifting attention quickly to the maturing 25/26 Arabica crop in Brazil. The quality of the harvest, as well as milling yields (the volume of cherries needed to fill one 60kg bag of green), will be important metrics to monitor. Along with the harvest comes the winter season in Brazil, so any news of cold weather could provide an upside jolt to the market, even if nothing materializes. On the other hand, a lack of cold-weather news would add a bearish influence to a market that is likely to see building sales pressure from Brazilian farmers as they harvest more and more of their crop. This week, I expect the market to trade in the 360-375 range as it is pressured by additional momentum selling.   

13 May 2025

Last week, coffee futures basis the most active July contract rose 2.35 cents from Friday to Friday to end at 387.75 USC/lb. I wrote last week that a willingness to deploy on the short side was emerging, making it likely that prices will continue to inch lower into the 375-385 range. On Tuesday, we fell below 385 in extremely light volume before finding support again by the end of the week. Overall, coffee trading has been extremely subdued to start May, especially in comparison with the crazy volatility seen throughout Q1. On the roaster side, it seems that overall nearby exposure to futures has been reduced when the market sold off in early April. On the producer side, it's becoming clear that we are in between crops at the moment. Brazilian inventories are nearly sold out, and Central American coffees are quickly approaching the end of the season. Colombia flow from the Mitaca crop also appears to have slowed down, making Peru and Brazil Robusta the only crops approaching peak harvest. In my experience, a lower volume and a more range-bound trading environment is dangerously bearish. Prices will likely fall over time from their all-time record highs, with fewer fundamental stories to focus on. However, it is also dangerous because any change in events can quickly swing prices back the other way, which would be further exacerbated by the lack of liquidity. In all, I expect again for us to trade in the 375-385 range this week, with some potential for momentum sellers to reengage to the downside, bringing prices another 10 cents lower if we were to break and hold below 375.  

6 May 2025

Last week, coffee futures basis the most active July contract fell 14.45 cents from Friday to Friday to end at 385.4 US cents/lb. Last week, I wrote that I would not be surprised at another attempt at $4.10 this week before we sell off to $3.90 by the end of the week. Indeed, this is what occurred with the market hitting a high of $4.19 before selling off on Thursday, May 1st. Tuesday and Wednesday both experienced attempts to push the market higher in lower volume hours of early morning. However, both rallies were suppressed as the main trading sessions got underway. Having the market rally before being pushed back to around the $4 range is a clear signal of resistance and a willingness of new sellers to step in at these levels. With momentum buying from the last week of April now exhausted and a willingness to deploy on the short side emerging, it is likely this week that prices will continue to inch lower into the 375-385 range. 

29 April 2025

Last week, coffee futures rallied 27.25 cents from Friday to Friday to end the week just below $4 per pound at $3.9985 basis the now most active July contract. Breaking the psychological threshold for the 3rd time this year would have been very significant, and it seems that the capping of Friday's rally (which went to a high of 410) showed that the market has more interest than buyers above $4. I wrote last week that "I believe that the market is now fairly priced and should continue to find support throughout this week to get back in a $3.60-$3.80 range". My range was overextended by macroeconomic and momentum flows into coffee, as several technical indicators were breached in rapid sequence. On top of this, trading volumes have reduced as it seems that the origin is largely done selling (Central American crop availability is quickly drying up), and the Brazil harvest is still 2 months away. On the other hand, roasters also seemed to have been rather removed, with many fixations having taken place in the early weeks of April. Without industry coming to trade in size, its algorithms trade against other algorithms for the most part. However, my indications suggest that all nearby momentum signals should have already been broken, making the pace of buying slow down. With no additional funds coming in, coffee will continue to rock with the macroeconomic winds a bit. I would not be surprised at another attempt at $4.10 this week before we sell off to $3.90 by the end of the week. 

15 April 2025

Last week, coffee futures fell 9.7 cents/lb to end the week at 353.6 USc’lb. Futures prices came to a low of 340 before finding support. I wrote last week that I expected the market to find support around $3.50 a pound and then bounce higher back into its most recent range. This was broadly the case as the Trump administration in the US walked back some of the most penalizing tariffs of their plan except for China, instead focusing on the broader 10% on everyone tariff. Similarly to past events driven by macroeconomic turmoil, the price action in coffee futures was mostly in line with other markets. For example, the 5-day correlation between Arabica futures and Gold rose to 0.83, which is much higher than the average correlation of the two products of 0.14. Similarly, coffee’s correlation to the equity benchmark S&P 500 rose to 0.49, while the long-term average is 0.05 or broadly uncorrelated. What does this mean? It means that in the last week, coffee has not followed its own fundamentals but rather reacted as part of a larger macroeconomic fear. Speculators reduced their long positions by $2.9 billion this week, bringing them to the lowest exposure since August last year in dollar value terms or January 2024 in terms of the number of lots. However, for coffee broadly the situation has not changed. We are still in an extremely tight stock environment for the moment. On the other hand, roasters seem to have fixed any nearby positions, significantly reducing the chances of a squeeze in the nearby May contract as we approach the delivery period. Nevertheless, I believe that the market is now fairly priced and should continue to find support throughout this week to get back in a $3.60 - $3.80 range. 

8 April 2025

This week, coffee futures prices collapsed -14.25 cents from Friday to Friday to end the week at $3.657 US dollars per pound. I had expected bullish indicators, combined with the upcoming report of large US tariffs coming on April 2nd, to put some fire under the market this week with futures approaching $4. Instead, the tariff announcement made by US President Trump was seen as a hugely negative macroeconomic event for all asset classes, including commodities. Simply put, the market just did not believe the extent of the tariffs that were proposed by the Trump administration would be possible. For coffee specifically, the most affected origins by the tariffs are Vietnam (46%), Indonesia (32%) and Nicaragua (18%). Everything else will be tariffed at 10%, and we still do not have true clarity on whether or not green coffee (or decaf or soluble) coming from Mexico would be subject to a 25% tariff or no tariff. For logistics, any coffee already on the water is safe from tariffs, but any new shipments will be subjected to tariffs. If you have bought coffee from the above three listed origins, please consider talking to your importer about other possible options. Delays and changes of mind are possible, but it seems that a more difficult global trade environment is here to stay. No matter what the outcome of the enforcement of tariffs is in the next week, the market’s selloff was largely attributed to macroeconomic malaise and fears of a global recession brought on by a trade war. For Arabica coffee specifically, we remain in an extremely tight stock environment with absolutely perfect weather needed to overcome a major deficit in supply. Therefore, this week is a good opportunity to add futures coverage for roasters. I expect the market to find support around $3.50 a pound and then bounce higher back into its most recent range. 

1 April 2025

This week, coffee futures prices fell 11.45 US cents per pound to finish at $3.79 US dollars/lb. Last week, I predicted that the market would trade in a $3.95 to $3.80 range as speculators let off the gas one last time. This is exactly what happened, and the pressure on the spread (difference in price between the May and July contract) has weakened from 6.1 cents to 3.55 cents inversion. This is significant, as the degree of inversion typically highlights the seriousness of a nearby deficit in the market, thereby attributing a significant premium to nearby coffee inventories due to the perceived scarcity. Having this degree of scarcity “lessen” as we approach the rolling period from May to July contracts sends a signal to the market that perhaps inventories are ok. However, we have received some very concerning data regarding inventories this month. The European Coffee Federation reported that coffee stocks in major European ports declined 655 thousand bags in February following a 1 million+ bag decline in January. While stocks are still higher than in February and March of last year, the intensity of the decline is the largest in history. Overall, this points to the sign that coffee demand is continuing to exceed expectations and that elevated levels of exports will continue to be needed to satisfy nearby coffee demand. Looking at supermarket sales data in Europe, it seems clear that price increases on the green coffee side have not yet been passed on to the consumer, so it is unlikely that the consumer feels any pressure to buy less coffee than usual. This bullish indicator combined with the upcoming report of large US tariffs coming on April 2nd put some fire under the market this week. Therefore, my prediction is that coffee futures prices will be knocking on the door of $4/lb by the end of this week. 

25 March 2025

Last week, coffee futures basis the most active May contract rose 7 cents from Friday to Friday to end at 391.4 US cents per pound. Last week, I wrote that the negative macroeconomic environment at the moment is perfect for roasters to fix futures and predicted that the market would test below $3.75 by end of the week. I was wrong as the market tried two times last week to break the $3.80 cent threshold before rallying 10 cents above. It seems that there had indeed been some roaster fixations done last week, as the positioning showed 1,736 lots added from the Commercial long side (generally seen to be roasters), while speculators continued to reduce their position. Speculators in the coffee space now hold the smallest position (in lots) of 2025. The last time they held a position this small, in October 2024, the market was trading more than a dollar per pound lower at $2.46. This continues to show the ability of speculators to rotate in and out of their length while getting roasters to pay higher and higher prices as we approach first notice day. I predict this will be the final week of liquidation before speculators will again reengage in the coffee futures and buy up contracts to pressure the roaster to hold fixations until the last minute and pay up. It has worked the last 7 times, why not do it again? I predict that this week, the market will trade in a $3.95 to $3.80 range as speculators let off the gas one last time. The time to fix futures is now!

18 March 2025

In the last 2 weeks, coffee futures oscillated in a range between $3.75 per lb and USD 4.10/lb basis the most active may contract. I wrote two weeks ago that I foresee us heading slightly higher this week to end at USD 3.90/lb given the tariff discussions seem to be colliding in the USA. Now it seems that tariffs once again were postponed another month, giving the market a breather. In terms of positioning, the last six weeks have seen speculator longs reduce their positions by 16,194 lots or $1.2 billion from their peak position in early February. Normally, such a large level of liquidation would warrant a significant downside price action, but over the period of the last 6 weeks futures prices went up 16 cents. This is because roasters, represented by the commercial longs, were forced to buy into March contract expiry, forcing futures to new all-time highs around $4.25. Now that the March contract has expired, roaster fixed positions have once again slipped. The gross commercial long (representing broadly roaster coverage) as of last week stood at 44,750 lots, climbing only slightly from their lows of 41,304 lots set after March futures first notice day. This is broadly the lowest level of coverage since November 2023 and spells disaster for the market come first notice day for the May contract if left as is. Any roaster reading this note should try to secure their May future fixations in the next 2 weeks. The opportunity of a negative macroeconomic environment at the moment is perfect to give the market some pause and allow you to fix your future levels nearby. I predict that the market will try to test below $3.75 by the end of the week.

4 March 2025

This week, coffee futures continued their descent, falling 16.2 US cents per pound to 373.05 cents basis of the most active May contract. Last week, I wrote that the market was expected to continue to let some air out and consolidate around $3.75 USD/lb. This is what happened. This week, several bullish storylines are emerging, largely centered around geopolitical risk regarding the implementation of tariffs by the US on Mexico and Canada (and importantly the risk of counter-tariffs). While the details are still not known, I believe that the biggest risk of tariffs on the coffee supply chain comes to the decaf market in coffee, as the Swiss Water process comes from Canada and the Mountain Water process and MC decaf comes from  Mexico. As a green coffee supplier, Mexico exports around 800k bags to the US annually, which is a little over 20% of Mexican production, but only around 3% of US green coffee imports. I believe that Mexico will find avenues to sell to other origins to substitute for the drop in US demand in case tariffs end up including green coffee. From a soluble perspective, the situation is slightly more complicated, as the US has recently ramped up soluble imports from Mexico and they now comprise roughly 25% of total Soluble imports. The main takeaway for the market is that with stocks at already extremely low levels in the US, another disruption to trade flows in the form of a tariff will likely create panic for nearby supply of some kind, even if the trade flows themselves will eventually resolve, and even make Mexican coffee cheaper and more attractive for certification on the ICE exchange. Therefore, I foresee us heading slightly higher this week to end at $3.90 USD/lb.

25 February 2025

This week, coffee futures collapsed 35.85 cents from Friday to Friday to end at $3.89 USD/lb basis the most active May contract. Last week, I wrote that I expected prices to rally back to the $420 USC/lb range by Wednesday as remaining roasters are left to fix their positions before coming off on Thursday and Friday and ending roughly unchanged. In broad terms, this is what occurred, with Tuesday’s price action hitting a high of 424.50 USD/lb basis the May contract and hitting a high of 434.10. On Wednesday, the pressure from last-minute stuck roaster fixations began to abate, and coffee futures tumbled more than expected. The driver, in part, was a large sell order on the March/May spread, showcasing that one of the market participants willing to take delivery of March futures had changed their mind. With the pressure of having to fix before the first notice day alleviated and one participant not wanting to take delivery at record prices, a vacuum of buyers appeared. This comes even though ICE-certified stocks have been drawing more than expected, with more than 300,000 bags coming out of the largest chunk of inventory (Brazilian coffee in Antwerp) in the last 2 months. The reduction in the stock highlights the sense of nearby tightness in the market and supports the argument that nearby inventories of Brazil are valuable, even if fresh crop Central American coffees are significantly cheaper at the moment. This week, the market is expected to continue to let some air out and consolidate around $3.75 USD/lb as roasters hopefully learn their lesson from the last 5 run ups coming into first notice day and decide to buy/fix some nearby coffee commitments instead of waiting until we come close to the May contract expiry. 

18 February 2025

This week, coffee futures continued their action of extreme volatility, rising 10.7 cents to $4.07 USD/lb basis the most active May contract. Last week, I mentioned the critical issue of roasters needing to buy their fixations before the March contract enters the delivery period, which will occur after this Wednesday. I said that the current fears surrounding tariffs will make the week finish trading around 420 Usc/lb basis the May contract. Indeed, coffee futures prices reached a high of 426.70 basis of the May contract and settled at 425.1 on Thursday. In the last hour of trading on Friday, a vacuum of buyers emerged and the market collapsed on the day from a high of 423.9 to 407.4 by the close. This rapid decline in prices showcases that volatility extremes are not always one-sided but can come simply from buyers wanting to take profit from their positions. A lack of selling interest on the upside can also spell a lack of interest in buying futures at all-time highs once coffee prices begin to fall. When we decompose the positioning of the market, it seems that speculators have been capped recently at around a $7 billion notional investment in coffee futures for the last 3 weeks. Therefore, every time the market goes up, they sell futures (take profit) in order to keep their risk parameters in line. On the roaster side, it seems their positioning is now the largest since August 2024 when the market was nearly $2/lb less. Over the last 3 weeks, 20,855 lots were added at roughly $3.73/lb, highlighting the fact that perhaps roasters are finally paying up for their future fixations and are aware that the risk only increases as we head closer and closer to March's first notice day. Therefore, this week, I expect prices to rally back to the $420 USC/lb range by Wednesday as remaining roasters are left to fix their positions before coming off on Thursday and Friday and ending roughly unchanged. 

11 February 2025

This week, coffee futures blasted off 18.85 cents from Friday to Friday to close at 396.7 basis the now most active May futures contract. Last week, I predicted that new money piling into coffee futures only feeds the panic from the commercial long side and reduce the appetite for sellers. As a result, I saw the natural target to be $4/lb, which we breached on Thursday. Lack of sell-side liquidity is showing up as the main problem, as pent-up roaster fixations are caught chasing a higher market. Intra-day traders are adding to the volatility as well, buying futures contracts on the open, and liquidating their longs during the day when roaster fixation orders come in. Until the first notice day for March futures on February 20th, we are running the risk of pent-up roaster buying. On the speculator side, it seems that specs reduced their positions last week to maintain an overall investment in coffee around $7 billion. This situation mirrors the cocoa market one year ago, where the only provider of sell-side liquidity became the non-commercial participants keeping their position size around the same level in dollar terms. The issue now comes from how high prices will go in the next 10 trading days. My opinion is that new buyer interest above $4 should be reduced somewhat as long as there are no bullish inputs to the market. With the current fears surrounding tariffs, however, this is unlikely so I believe the week will finish with the May contract trading around 420 USC/lb. 

4 February 2025

This week, coffee futures prices basis the most active March contract rose 31.7 cents from Monday to Monday to 380.9 US cents/lb. Last week, I discussed how. Commercial long coverage, risk of trade wars, and extending speculative positioning all pointed to higher market risk. Nevertheless, I had foolishly expected a pullback with coffee futures predicted to pare back and establish a new floor around 340 USc/lb by Friday. Instead, coffee futures made another leg higher spurred on by technical buying in a low liquidity environment. Without any clear resistance, the market is finding itself in increasingly illiquid trading conditions. Farmers are the only natural sellers in this market, but even buying interest for spot coffee has become reduced as cash constraints inhibit exporters from buying larger quantities (or even the same quantities as they had when coffee was around $2/lb). Instead, we are left with roasters continuing to be behind in terms of futures fixation coverage and being forced to buy at higher prices. Commercial longs, a proxy for roasters, extended coverage this week by 3,756 lots or 7.8%, the largest coverage addition since November 26th when prices first rose from $2.81 to above $3. Adding coverage in a market that is 50 cents higher shows how fearful the commercial sector is of the upcoming Index roll and delivery period in the March contract. On top of this, net speculative investment is now the highest in terms of the number of lots since the all-time record was set on November 8th, 2016. From a notional value perspective, speculative investment is over $7 billion, nearly double what it was in November 2016 and $2 billion larger than the previous record set following the Brazil frost in early 2022. All of this new money piling into coffee futures only feeds the panic from the commercial long side and reduces the appetite for sellers. As a result, the natural target for this week is to test the $4/lb threshold certainly before the first notice day in the March futures contract.

28 January 2025

This week, coffee futures prices basis the most active March contract rose 20.4 cents from Friday to Friday to end at 347.55 USc/lb. This is a record price for coffee futures, beating previous records set in the 1970s. Last week, I wrote that issues with liquidity in the contract, roasters being behind in coverage, and the increased volatility coming from the risk of trade wars, would result in us breaking out of the 330-335 USc/lb range. Now it is one week later, and none of the risks to the futures market have abated. Commercial long coverage has decreased further following the index rebalancing period and now stands at 22,833 lots or $2.7 billion below average. The risk of trade wars continues to rage, as evidenced by Sunday’s spat between US President Trump and Colombia’s President Petro. The instant trade war on X at some point promised tariffs as high as 50% on Colombian coffee imported into the US (totaling 4.6 million bags last year or 39% of Colombia’s exports) before the two sides reached an agreement. Lastly, speculative interest in coffee continues to grow as Non-Commercials now exceed 50,000 lots of net length for the first time since July 9th, 2024 (peak winter season period), and at $6.2 billion notional value it is now the largest dollar investment in coffee in history. All of these records point to risks further ahead but also suggest that perhaps last week’s action was too much too fast. Therefore, I expect coffee futures to pare back to establish a new floor of around 340 USc/lb by Friday. 

21 January 2025

This week, coffee prices rose 4.5 cents from Friday to Friday to end at 328.35 US cents/lb basis the most active March contract. Last week, I wrote that buy-side drivers will overwhelm the market this week, pushing futures prices higher to a 330-335 USC/lb range. In the end, the index rebalancing period ended with the Index selling -10,261 lots on the week, well below what I had expected. What was more surprising was that speculative investors were the majority buyers of the index selling. Commercial longs, a proxy for the roaster, actually reduced their positions by 1,488 lots. This puts the Commercial long in the lowest position since February 20th, 2024 and nearly half of the January 5 year average. It is clear that roasters missed their chance to fix the market in a well-advertised period of liquidity. Now, I fear that the amount of liquidity in the market will collapse, leaving roasters forced to chase prices higher as they take delivery of their Q1 inventory. On top of this, the initial moves of the incoming Trump administration are likely to add volatility this week, which would be positive for commodities. Therefore, I believe that we will finish the week breaking out of the 330-335 range I mentioned last week. 

13 January 2025

This week, coffee futures prices rallied 5.2 cents from Friday to Friday to end at 323.85 USc/lb. My bold prediction last week was that despite the massive index rebalancing occurring, prices would fall a bit at the start of the index selling but recover to unchanged by the end of this week. Prices fell 2.2 cents from Monday to Wednesday before new buying came into the commodity complex. On Thursday and Friday, futures rallied 7.4 cents (more than my expectation) as selling from Index rebalancing was overwhelmed by macroeconomic flows into commodities. These flows were thematically tied to a selloff in the equity space following a surprise US jobs growth figure in December. The logical flow is that better employment can make the Federal Reserve more hawkish in its effort to combat inflation, and inflation pressures themselves can be stronger with a better US labor market. This is a commodity buy and an equity sell signal. This week, we will see if indeed inflationary pressures are stronger as US and the UK will release their CPI figures on Wednesday. My feeling is that a hotter inflationary figure will see another wave of buying coming into commodities. Therefore, as the index has 2 more days left of selling it is likely that buy-side drivers will overwhelm the market this week, pushing futures prices higher to a 330-335 USC/lb range. 

7 January 2025

In the last 2 weeks of the year, coffee futures basis the March contract fell 8.65 cents to end at 318.60 as of the end of Monday's trading day. The main driver behind the falling prices has been the end of year profit taking of long positions. The key period for Index rebalancing begins this Wednesday, where the Bloomberg commodity index is expected to sell between 14-19 thousand lots of futures in order to maintain its target weighing of coffee within its commodity basket. My estimate, as I've written for several weeks already, is on the higher end of this range. The main question posed by everyone in the market is: "Who will be the buyer of this sell-side liquidity?". The last 2 times the index had this many coffee futures to sell were 2015 and 2022. In 2015, the market fell 12 cents during the index rebalancing period, as futures were bought on a nearly even split basis by Commercial Longs (a proxy for roaster) and Non-Commercials (a proxy for speculators). In 2022, the index sell period was absorbed completely and futures actually rallied 8 cents. In this situation, speculators absorbed nearly all of the index's sell-side liquidity. I think a binary picture of the market going up or down is not particularly helpful. However, it's important to note that in 2022, the non-commercial net position started the year at 38,417 lots net long, very similar to what we have today, and that speculators extended their position to a high of 53,279 lots as of February 15th before the market came back down from a high of 251.75. Therefore, assuming that speculators are already heavily invested in coffee and may not want to buy more is short-sighted. Nevertheless, the roaster is likely also disciplined this time around and will unlikely chase the market higher in the case of a rally. Therefore, my bold prediction is that we fall a bit at the start of the index selling but recover to remain unchanged by the end of this week.