In a December 12, 2024, Barchart article, I asked if coffee was heading for a new record high. I concluded the piece with the following:
Cocoa was the star performer in the soft commodities sector in 2024, but coffee took the bullish baton in November. Coffee only traded over $3 per pound four times and eclipsed the upside target at the 1977 $3.3750 per pound. If coffee futures follow cocoa, we could look down the current price in 2025 instead of up.
On December 11, 2024, nearby ICE March coffee futures were at the $3.1920 per pound level. After reaching a new record high in December, coffee futures corrected and then rallied to even higher highs in late January 2025.
Coffee futures reach a new record high
Arabica coffee futures have reached above the $3 per pound level four times since the 1970s.
The quarterly continuous futures contract chart highlights the most recent rise in coffee prices that took the soft commodity to a record $3.6850 high in January 2025.
Consolidation above $3 was bullish
As the quarterly chart shows, a significant price correction followed each move above $3 in 1977, 1997, and 2011. Over the years that followed those three highs, coffee prices more than halved in value.
While it is still early days after the last rally that eclipsed the previous 1977 $3.3750 per pound high, coffee futures remain significantly above that level in late January 2025.
The six-month daily ICE Arabica coffee chart for March delivery illustrates that prices remained above $3 per pound in January 2025, digesting and consolidating the recent gains before moving to higher highs.
While the technical coffee trend remains higher, supply and demand fundamentals will determine if coffee futures head for even higher highs over the coming weeks and months. Consolidation occurs as a market prepares for its next move, higher or lower. Historically, the odds favored the downside as coffee futures did not remain above the $3 per pound level after the 1977, 1997, and 2011 highs. However, 2025 has been another story. The latest rally put Colombian supplies in the spotlight.
Supply concerns continue
Brazil is the world’s leading Arabica coffee bean-producing country.
The chart shows Brazil led the world in coffee production, far ahead of second-place Vietnam. Brazil produced more coffee beans than Vietnam and third-place Indonesia, combined. Colombia is the fourth-leading producer.
Brazil’s top three growing areas are Sao Paulo, Parana, and Minas Gerais, all in the country’s southeastern region where the weather conditions support coffee crops. Like cocoa, where prices have soared to over double the pre-2024 1977 high, coffee production comes from a relatively small number of regions. The production concentration makes the annual coffee crop vulnerable to adverse weather conditions and crop diseases. Carlos Mera, head of agricultural commodities at Dutch financing institution Rabobank, pointed out, “In Brazil, this will be the fifth consecutive Arabica harvest that is disappointing because of adverse weather.” The supply concerns ignited a bullish fuse under the coffee futures market, sending the price over $3 per pound wholesale to a new record high. At above the $3.65 level in late January 2025, coffee futures continue to experience weather-related concerns and are at record highs. Meanwhile, frictions and tariff threats from the U.S. on Colombia have only exacerbated the upward momentum of the coffee futures markets, increasing supply concerns.
Levels to watch in the ICE coffee futures market
The weekly coffee futures chart highlights the bullish price pattern of higher lows and higher highs since October 2023.
Coffee is a volatile commodity. Over the past five years, the price has traded below $1 and above $3.65 per pound. The two-year chart shows that technical resistance for the continuous ICE futures contract is at the recent January 2025 all-time peak. Support is at $3.3750, the previous record high from the 1970s, the psychological $3 level, $2.7505, the late September 2024 high, and $2.4080 per pound, the late October 2024 low.
Coffee futures remain in a bullish trend as prices consolidate in late January 2025. While the historical trading pattern favors an eventual correction below $3, the fundamental supply and demand equation suggests that prices could remain higher for longer and reach new record highs if the weather conditions and trade frictions continue to reduce supplies. Moreover, cocoa’s price action suggests that coffee could rise to $4 or higher as the upside potential is wide open at new record peaks.
No ETF or ETN products for coffee- Futures are the only route for participation
The iPath Cocoa Subindex ETN product (NIB) ceased trading in June 2023. NIB was the only coffee ETF or ETN product. Therefore, participating in the volatile coffee market is limited to the futures and futures options arena on the Intercontinental Exchange.
Each ICE Arabica coffee futures contract contains 37,500 pounds (approximately 250 bags) of coffee beans. At $3.68 per pound, each contract is worth around $138,000. The original and maintenance margin are currently running at $10,447 and $9,498, respectively, meaning a market participant can control an ICE coffee contract for an 7.57% good faith deposit. Controlling a coffee contract from the long or short side requires marginal calls if the levels fall below the maintenance level.
The soft commodities sector includes coffee, world sugar, cocoa, cotton, and FCOJ. Three of these commodities reached record highs in 2024, with explosive rallies in coffee, cocoa, and FCOJ futures.
Coffee futures rose to 31.45 cents or 9.32% above the 1977 record high, so far. Meanwhile, frozen concentrated orange juice futures exploded to $5.4315 per pound in 2024. The OJ rally that began in 2023 took the soft commodity $3.1565 or 138.75% above the 2016, $2.275 per pound all-time high.
Cocoa futures rose to $12,931 per ton in 2024. The pre-2024 high was in 1977 at $5,104 per ton. Cocoa experienced a parabolic rally that took the price 153.4% above the 1977 peak. Like coffee, FCOJ and cocoa rallies occurred on weather-related supply issues. If the orange juice and cocoa markets are an example, coffee futures could have significant upside potential and defy the historical pattern of corrections after eclipsing the $3 per pound level.
