# Coffee

> Coffee futures track arabica and robusta beans grown mainly in Brazil and Vietnam. Learn the contracts, frost and drought risk, currency effects and price drivers.

Source: https://learn.tradelabsai.com/commodities/coffee/  
Track: Commodities · Level: Intermediate · Updated: 2026-10-03  
Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice.  
Cite as: TradeLabs Learn, "Coffee", https://learn.tradelabsai.com/commodities/coffee/

Coffee is one of the most traded soft commodities. It is grown in tropical regions, mainly by smallholder farmers, and consumed everywhere. Two species dominate: arabica, prized for flavour, and robusta, hardier and higher in caffeine, often used in instant coffee and blends. Brazil is the largest producer of both arabica and coffee overall, and Vietnam is the largest robusta producer. Coffee prices are famously volatile because of weather risk in a few key growing regions, currency moves and the slow response of supply.

## The contracts

| Contract | Exchange | Size | Quote |
|---|---|---|---|
| Coffee "C" (arabica) | ICE US | 37,500 pounds | Cents per pound; 0.05 cent tick = $18.75 |
| Robusta coffee | ICE Europe (London) | 10 tonnes | Dollars per tonne |

A 10 cent move in arabica is $3,750 per contract.

## Where coffee comes from

| Country | Role |
|---|---|
| Brazil | Largest producer; arabica and robusta (conilon) |
| Vietnam | Largest robusta producer |
| Colombia | Major high quality arabica producer |
| Indonesia, Ethiopia, Honduras, Uganda, India | Significant producers |

Brazil's arabica trees often follow a two year cycle of higher and lower yields ("on year" and "off year"), which affects supply estimates.

## What moves coffee prices

| Driver | Example |
|---|---|
| Brazilian weather | Frost in winter (June to August) and drought during flowering (September to November) |
| Vietnamese weather | Drought affects robusta output |
| Brazilian real | A weaker real makes Brazilian farmers more willing to sell, often weighing on prices |
| Inventories | ICE certified stocks indicate available high quality supply |
| Demand | Consumption grows slowly but steadily; Asian demand rising |
| Costs and policy | Fertiliser, labour, shipping costs; EU deforestation rules affecting supply chains |
| Speculative positioning | Large fund positions can amplify moves. See [Sentiment Data](https://learn.tradelabsai.com/alternative-data/sentiment-data/) |

**Example: A Brazilian frost**
In July 2021, severe frosts hit Brazil's coffee growing areas, damaging trees that would take years to recover. Arabica futures jumped about 30% within days, from around $1.45 to nearly $2.15 a pound, and kept rising into 2022 as drought added to the damage. Because coffee trees take three to four years to reach full production after replanting, the supply loss affected several seasons. See [Seasonality in Commodities](https://learn.tradelabsai.com/commodities/seasonality-in-commodities/).

## Price history

- **1975:** a severe Brazilian frost caused a historic price surge.
- **1994:** frosts again sent prices sharply higher.
- **2001 to 2002:** prices fell to multi decade lows, causing hardship for farmers.
- **2024 to 2025:** arabica and robusta both reached record highs after poor harvests in Brazil and Vietnam and low inventories, with arabica rising above $4 a pound in early 2025.

## From farm to cup

Coffee cherries are picked, processed (washed or dried), and the green beans are graded, bagged and shipped to roasters around the world. Exchange certified stocks must meet strict quality standards, so ICE inventories show how much deliverable high quality coffee is available. When certified stocks fall to multi year lows, as they did in 2022 and 2024, nearby futures can rise sharply relative to later months. See [Storage and Inventories](https://learn.tradelabsai.com/commodities/storage-and-inventories/).

## Trading coffee

- **Outright futures and options** on ICE.
- **Arabica versus robusta spread:** reflects quality premiums and relative supply.
- **Calendar spreads:** tight supply shows up as backwardation. See [Backwardation](https://learn.tradelabsai.com/futures/backwardation/).
- **Weather and crop tour based analysis** in Brazil and Vietnam.
- **Currency awareness:** watch USD/BRL. See [Currency Pairs: Majors, Minors and Exotics](https://learn.tradelabsai.com/forex/currency-pairs/).

## Risks

- **Weather shocks** in concentrated regions.
- **High volatility:** daily moves of several percent are common.
- **Liquidity** is lower than in major grains or energy.
- **Quality and grading details** in physically delivered contracts. See [Physical Delivery vs Cash Settlement](https://learn.tradelabsai.com/futures/physical-delivery/).

## Frequently asked questions

### What is the difference between arabica and robusta coffee?

Arabica is milder and more flavourful, grown at higher altitudes, while robusta is hardier, more bitter and higher in caffeine, used often in instant coffee.

### Why are coffee prices so volatile?

Production is concentrated in a few countries, weather events like frost and drought can damage trees for years, and currency moves affect farmer selling.

### How do Brazilian frosts affect coffee prices?

Frost can damage trees and reduce output for several years, often causing sharp price rallies.

Next, learn about sugar, another key soft commodity, in [Sugar](https://learn.tradelabsai.com/commodities/sugar/).

## Continue learning

- Next lesson: [Sugar](https://learn.tradelabsai.com/commodities/sugar/)
- Previous lesson: [Soybeans](https://learn.tradelabsai.com/commodities/soybeans/)
- Related: [Soybeans](https://learn.tradelabsai.com/commodities/soybeans/): Soybeans are crushed into meal for feed and oil for food and biofuels. Learn soybean futures, Brazil vs US supply, China's demand, the crush and key price drivers.
- Related: [Agricultural Markets](https://learn.tradelabsai.com/commodities/agricultural-markets/): Agricultural markets cover grains, oilseeds, softs and livestock. Learn the main contracts, the USDA reports that move them, weather, seasonality and trade policy.
- Related: [Sugar](https://learn.tradelabsai.com/commodities/sugar/): Sugar prices depend on Brazil's cane crop, India's policy, ethanol economics and weather. Learn sugar futures, the ethanol link, key producers and what moves prices.
- Related: [Seasonality in Commodities](https://learn.tradelabsai.com/commodities/seasonality-in-commodities/): Many commodities follow seasonal patterns tied to weather, harvests and demand. Learn key patterns in grains, energy and softs, how to measure them and their limits.
- Related: [Currency Pairs: Majors, Minors and Exotics](https://learn.tradelabsai.com/forex/currency-pairs/): Forex trades currencies in pairs, like EUR/USD. Learn base and quote currencies, how to read a quote, majors, crosses and exotics, and what moves each pair.
- Related: [Storage and Inventories](https://learn.tradelabsai.com/commodities/storage-and-inventories/): Inventories are the buffer between commodity supply and demand. Learn the theory of storage, how stocks affect prices and curves, and the key inventory reports.