The Coffee C Market is a complicated topic but incredibly interesting; it's a good one to grasp. It’s also a very relevant topic right now, as coffee prices have been extremely volatile and are currently near all-time highs.
What is the “C Market”?
The C Market is a global commodity exchange where Arabica coffee futures contracts are traded. It is similar to other hard and soft commodities such as crude oil, gold, wheat etc. Traders buy and sell “futures” contracts, which are contracts to buy or sell coffee at a future date. A coffee futures contract is for 37,500 lbs of coffee, which curiously, is less than a full container load – but this is the standard contract size in the market. The “C Price” is the current or latest price or value of the C Market at a given time, which is expressed in US cents per pound (lb).
What about Robusta?
There is also a Robusta market. The Arabica market is based in New York at the NY InterContinental Exchange (NY ICE). Whereas the Robusta market is based in London at the London International Financial Futures Exchange (LIFFE). The trading hours are aligned to New York and London time zones accordingly. Robusta futures are traded in USD dollars per metric tonne.
What influences the C Price?
Traditionally the main driver of the C price is supply and demand. Put simply, if there is an oversupply, you would expect the C price to fall. Just like the price of blueberries comes down in summer when they are in season, this is because there are a lot more blueberries available. In winter, the price goes up because they are harder to come by. Well in theory with coffee, when there is an abundance of coffee the price softens and when there is a shortage, the price increases.
However, supply and demand are not the only drivers and unfortunately for us coffee roasters, there are plenty of traders out there who trade significant volumes of coffee contracts, manipulating the market with no intention to ever take physical delivery of coffee. There is money to be made (or lost) in buying and selling futures contracts, just like trading currencies (gold etc).
In recent years, this speculative trading has become more and more influential, with some large hedge funds now including coffee positions in their portfolio.
The other major influence on the C Price, broadly related to future supply and demand, is the market sentiment on how things like weather and geopolitics might impact coffee supply. If there is even a threat of a frost, the C Price tends to rally strongly, regardless of whether or not a frost actually eventuates. Likewise, things like the Evergreen ship blocking the Suez Canal in 2021, the price of fertiliser, general elections, global currency movements, EUDR laws, wars and conflicts can all send the C moving up or down depending on the sentiment or possible consequences. Sometimes, movements in other commodity prices can pull coffee up and down with them too, regardless of whether they are produced in coffee-growing regions.
What are “Certified Stocks”?
This may be a phrase that you have heard at some point. What this refers to is physical coffee that is held with the ICE at various warehouse locations around the world. These coffee exchange warehouses carry commodity grade coffee that underpins the C futures market. The warehouses hold this coffee and roasters are able to buy direct from ICE at the current market price. Typically, because this is just commodity-grade coffee, Roasters such as Allpress would not buy this quality of coffee but larger, more mainstream brands would.
Typically, global certified stocks usually sit around 2-3 million bags at any one time, but during Covid when shipping was expensive and unreliable, people flocked to the ICE warehouses to buy coffee, and these stocks were depleted down to around 200,000 bags – which was a major influence on driving the C price even higher, as the market sentiment was panicked about these stocks running out completely. Today, they have recovered to around 850,000 which is still fairly low but a lot more comfortable.
What is a “fair C price”?
Historically, the C Price has averaged around 130 USc/lb over the medium and long-term. Usually fluctuating with supply and demand, with occasional spikes and drops which can mostly be attributed to good or bad weather. Between 2018 – 2020, Brazil had favourable weather and had their 2 largest ever harvests on record, and throughout that span the C Price averaged around 100 c/lb getting as low as 88 c/lb in May 2019. During that time, it was considered a price crisis, unsustainably low prices for farmers and the industry was really concerned about what would happen. There were even serious proposals to abandon the C market altogether.
Today, the C Price is sitting above 320 c/lb, which ironically some would now say is unsustainable for roasters. What makes the C price challenging is not necessarily the level but the volatility and the sudden movements, either upwards or downwards. It can make it very hard for both sellers and buyers to forecast and budget.
When we speak to traders and growers at origin, most people agree that a reasonable C price that should be sustainable for both sides would be somewhere between 190 – 220 c/lb. But it is truly impossible to determine a cost of production that applies to everybody, and as with any industry, the producers who are more efficient and/or produce higher quality coffees are rewarded with higher prices. Even two neighbouring farms in the same region could have very different costs of production that they need to try and cover when selling their coffee. It’s important to remember that it is an open economy and there will always be some producers who are more profitable than others. Just like there are profitable and unprofitable cafes, stores, factories etc.
The other concerning thing about coffee prices is that generally over time, they have been quite low more often than not, and it is a hard job growing coffee. When the market is too low it can be devastating to producers. The average age of coffee farmers tends to be quite high, not far off traditional retirement ages in some cases. There is a concern now in some origins that the next generations do not want to be coffee farmers, they view it as a hard job with unpredictable incomes. Instead they are more interested in moving to cities and embracing more modern careers. It is a real issue that needs to be solved, and higher pricing will play an important role in people maintaining interest in continuing to grow coffee, which is critical for the future of coffee supply.
Luckily in specialty coffee, the C price is not the price paid but it is only the baseline, and there are quality premiums that come into the equation too.
What is going on with the C at the moment?
As of the end of 2024, the C price is at a nearly 50 year high at 325 c/lb, the last time it was higher was August 1977. The current situation is really the culmination of events over the last few years so it would pay to look at those to put things in perspective.
2018 - 2020
As mentioned, there was a sustained period between 2018 – 2020 where the C price was particularly low, it got as low as 88 c/lb in 2019. This was certainly too low and not sustainable for the industry. One consequence of this period of low prices was that producers were less able to reinvest in their farms, and had to sacrifice pruning, fertilising, weed control etc. to manage costs. Everybody knew that would inevitably lead to lower output in upcoming years, but there was not much choice.
2020 – 2023
When Covid came along, the market didn’t really know how to react. There was a global surplus of coffee from the previous 3 years, cafes and retail stores were closed and populations were in various forms of lockdowns etc. so global coffee consumption was turned on its head and a lot of roasters or importers found that they had too much coffee on hand. Then suddenly, global logistics choked up, there were container shortages, vessel shortages, and shipping times became extremely unreliable, not to mention the cost of shipping reached astronomical highs. This put pressure on the certified stocks, driving the C price higher again.
The C price moved between 130 and 150 for the first half of 2021, until late July when a bad frost hit the coffee growing regions in Brazil. Within a week the C price moved to 220 c/lb as estimates were floating around of how many millions of bags of coffee would be lost. As it was late July, the majority of the 2021 harvest had been completed, but the concern was on the new growth and buds that were developing on the trees ahead of the next harvest. 2022 was initially forecasted to be large, nearly 60 million bags, but the result from the frost meant they finished 2022 with closer to 50 million bags. The C spent the majority of 2022 above
200 c/lb, and between 150 – 200 c/lb through 2023, softening due to a good Brazil crop (their third largest on record) in 2023.
2024
The C operated in a pretty tight range between 180 – 190 c/lb for the first half of 2024, but since then there has been several instances of bad news for global coffee supply. To start with, there was an extreme drought in Vietnam, who is the world’s largest Robusta producer. This has affected Robusta supply significantly, sent the RC market to record highs, and in turn has put pressure on the Arabica market as Robusta demand spills over into lower quality Arabica coffee. As news of this drought started to spread, and the severity of the problem became apparent, the C price rose sharply to 240 c/lb.
In August 2024 there was another frost in Brazil. This time, fortunately it was nowhere near as severe as the 2021 event, but it was a harsh reminder that coffee production is sensitive, and climate plays a key role.
Then, a drought. Usually in Brazil, the rains come each year in September, and the rains trigger the development of flowers that become cherries so ideally the rains are steady and consistent, so that the cherries are at a uniform stage of development. However this year, the rains did not come in September, in fact they didn’t really come until November. This coupled with hot dry weather meant that the coffee trees have been under a lot of stress, they had to wait an extra two months for rain. Since the rains came, there has been widespread flowering, but there are concerns that the rains were too late, the trees are already stressed and that many of the flowers will not fix and will drop to the ground. This puts some doubt on expectations for the 2025 harvest, which the industry is relying on to support the issues in Vietnam.
Is there hope for the future?
Absolutely! The coffee market has experienced many cycles similar to what we’re seeing now. Although looking back at it, it has been a pretty unusual few years. Prices have been too low before this latest rally, and costs of production have been increasing in recent years. Climate change is a serious problem and it is showing itself more often with droughts, floods, frosts etc. But it’s also important to remember that Brazil has had it’s 3 largest ever crops within the last 6 years and this recent drought was pretty unlucky. Colombia has also had a good harvest in 2024 and late 2023. The unique challenge right now is that this year there are serious supply problems in both Brazil and Vietnam, the two biggest Robusta producers. This, along with the biggest Arabica producers both suffering from droughts is unprecedented. Will it happen every year? Of course we hope not.
External factors continue to influence the market more than ever, wars and conflicts always lead to volatility and uncertainty with all commodities and currencies. Shipping is still an issue, and America's recent talk of tariffs has spooked all commodity markets too.
One thing that gives us hope is that historically these periods of higher prices do tend to lead to reinvestment in farms, pruning, fertilising etc. and that tends to be followed by good crops. There have never been more programs at origin focusing on sustainability, social and environmental responsibility, improving quality and yields etc. and we are proud to work with several exporters who are very active in that space,
