Current Coffee Price on the Exchange and Future Outlook

Current coffee price

Price change

Historical prices

Historical coffee prices

The price of coffee is quoted in US dollar cents per pound (0.453 kg). Recently, inflation and rising commodity prices have been discussed more and more often. Coffee is among them, although it has not yet reached its historical peak prices.

Coffee was most expensive in the second half of the 1970s. At that time, it cost more than 300 cents (£0.49) per pound. Another sharp rise in its price took place in the second half of the 1980s, when the price climbed to nearly 250 cents (£0.41).

The price of coffee also rose in 2011, reaching just under 300 cents (£0.49). It then gradually declined to a local low of 91 cents (£0.15) in April 2019.

What affects the price of coffee on the exchange

Coffee is one of the most traded commodities in the world. Coffee production, and therefore its price, is influenced first and foremost by the political stability of the countries from which this commodity is imported. If a given country suffers, for example, from war or frequent changes of government, this will also affect coffee harvests.

The price of coffee is also influenced by traders who speculate on its price using derivatives. The traded commodity may not physically exist at all. This can lead to major price swings. Last year showed that if a sufficiently large number of people are mobilised on social media, they can speculatively drive up the price of many assets.

On the supply side, weather and overall climate conditions are decisive. Coffee is harmed most by droughts and floods, which are becoming increasingly common in certain parts of the world. In addition, the price of coffee cannot be stabilised easily. By contrast, with oil or gold, which are extracted, supply volumes can be regulated more easily.

Technical analysis of coffee price movements (coffee futures)

The technical analysis of the coffee price below is based on 28 indicators. The figures shown represent the number of indicators leaning towards BUY, SELL, or NEUTRAL.

In theory, combining a larger number of indicators could improve the accuracy of forecasting future price movements compared with using just one indicator. Unfortunately, we do not know which indicators are used in this technical analysis. It is an external plugin from TradingView, and they do not provide this information.

Although we consider the widget a useful tool for a rough estimate of the future price, we certainly cannot guarantee that trading based on these forecasts will be profitable.

Types of coffee

There are four main varieties of coffee grown worldwide. The two best-known and most popular types are Arabica and Robusta, which are also sometimes combined when preparing coffee.

Arabica is known for being demanding to cultivate. Arabica plantations must be located at altitudes of 1,000 to 1,800 metres above sea level. The Arabica coffee plant is also susceptible to mould and has a lower caffeine content and a fuller flavour. According to some consumers, its taste is more pleasant than that of other varieties.

By contrast, growing Robusta (Coffee canephora) is not as demanding in terms of conditions. This is why it is cheaper. However, some consumers do not like it as much because of its harsher taste. It is not suitable for making filtered coffee. The other coffee types, Excelsa and Liberica, are not very widespread.

Coffee production

Global coffee production reaches 175 million bags, which corresponds to 10.5 million tonnes, according to data available for 2020. Arabica accounts for a total market share of 70%, Robusta production represents approximately 25%, and the remaining five per cent consists of other varieties.

The three largest coffee producers in the world are Brazil (2.8 million tonnes), Vietnam (1.1 million), and Indonesia (0.8 million tonnes). Other major producers include Colombia, Ethiopia, Honduras, and India. The Robusta variety is grown in some African countries.

How to trade coffee effectively?

The exchange price of coffee is quoted in US dollar cents per 1 pound (0.453 kg). Historically, it has been traded on the US ICE exchange (Intercontinental Exchange) in the form of futures contracts. Their volume is 17 tonnes of coffee. Such volume is suitable for large buyers who process coffee further.

Retail investors can trade coffee using so-called CFDs (contracts for difference) or by buying shares in companies that sell or process coffee.

1. Coffee CFDs

CFDs (Contracts for Difference) are a way to speculate on the price of coffee without physically owning it.

Advantages:

• You can profit even when the price of coffee falls through short selling.
• You only need a smaller initial capital outlay thanks to leverage – leverage multiplies profits, but also losses.
• Immediate liquidity – you can open and close positions within seconds.
• The option to trade 24/5.

Disadvantages:

• Daily overnight holding fees (swap).
• Leverage increases losses, but also potential profits.

Shares linked to coffee

Starbucks (SBUX) – Global leader in coffee sales

Starbucks represents a unique investment opportunity in the coffee sector. The company operates more than 30,000 coffee shops worldwide and continues to expand into new markets. Interestingly, Starbucks buys approximately 3% of global coffee production, making it one of the largest buyers in the world.

Investment potential:

• A strong brand with high customer loyalty allows the company to maintain higher margins than its competitors.
• An innovative approach to digital technology – the Starbucks mobile app is among the most successful payment apps in the world.
• A regular dividend policy with a history of annual dividend increases.
• Expansion into emerging markets, especially in Asia, where the middle class is only just discovering coffee-drinking culture.

Investment risks:

• High dependence on the economic cycle – during recessions, people cut back on visits to coffee shops.
• Growing competition from local independent coffee shops and smaller chains.
• Sensitivity to rental prices in prime locations where the coffee shops are based.
• The need for continuous investment in branch refurbishments and digital technologies.

Nestlé (NESN) – Stability and diversification

Nestlé represents a more conservative investment choice. As the world’s largest food company, Nestlé offers the stability of a major group combined with significant exposure to the coffee market through the Nescafé and Nespresso brands.

Why consider investing:

• A dominant position in the instant coffee market through the Nescafé brand.
• A premium segment covered by the Nespresso brand with high margins.
• A strong position in emerging markets.
• A consistent dividend policy with more than 25 years of uninterrupted dividend growth.
• A diversified portfolio reduces the risk of dependence on a single market segment.

Investment risks:

• Slower share growth due to the company’s size and broad product range, which also increases diversification.
• A more complicated response to changing consumer trends because of the firm’s complex structure.
• Lower return potential compared with smaller, more dynamic companies.
• Regulatory risks associated with operating in many markets at the same time.

JM Smucker (SJM) – American coffee giant

JM Smucker may come as a surprise to many European investors, but it plays a key role in the American coffee market. Ownership of brands such as Folgers and a licence for the retail sale of Dunkin” Donuts coffee makes it a significant player.

Investment case:

• A dominant position in the American retail coffee market.
• Stable financial results thanks to its focus on essential consumer goods.
• An attractive dividend yield with a long history of payouts.
• Growth potential through acquisitions and innovation in the premium coffee segment.

Investment risks:

• Strong dependence on the American market limits geographical diversification.
• Competitive pressure from supermarket own-label brands.
• Lower innovation potential compared with pure coffee companies.
• Sensitivity to changes in consumer preferences in the mainstream coffee segment.

You can also try trading coffee via CFDs, as well as buying real shares, free of charge on a demo account, for example with eToro.

Frequently asked questions about coffee