For years, the game was simple.
Farmers farmed. Traders traded. Buyers bought.
And price? Price was dictated by those with the power.
Farmers—especially the smallest ones—were price takers. They sold at harvest, not because they wanted to, but because they had to. Bills, loans, wages—no time to wait. Meanwhile, buyers called the shots, dictating the tempo, pushing when they could, pulling back when it suited them. Intermediaries played the middle, smoothing out volatility, managing stocks, taking risks.
That was the system.
But now? Not exactly the same music anymore.
It’s not a revolution. Not a full reversal. But enough to shake old habits. If you’ve been watching coffee these past months, you feel it too.
This isn’t just about weather. Not just about stock levels. It’s about power dynamics.
Relative power, not absolute—producers are still far from the driver’s seat. But buyers aren’t as comfortable anymore, and traders? They’re walking on eggshells with ski boots.
A Market on the Edge
It starts quietly.
Prices climb. 240c. 250c. “Too much, too fast,” people say. Buyers hesitate. They wait. Maybe prices come down. Maybe something cracks.
But coffee doesn’t wait.
Buyers still need to buy—every day, every week, every month. And when they delay, they don’t solve the problem. They just push it forward. What isn’t bought today must be bought tomorrow. And tomorrow? It might be worse.
Traders—normally the market’s shock absorbers—start stepping back. Too much volatility, too many margin calls, too much risk. The usual safety net of liquidity is gone. Nobody wants to be the one holding the hot potato.
And then, something unusual happens: farmers don’t rush to sell.
For the first time in years, some of them can wait.
Not all, of course. Many still have no choice. But overall, there are fewer desperate sellers. Before, farmers had to sell as soon as the crop touched the ground. Now? Some are keeping one foot on the brakes.
By January, it’s no longer just a price rally.
It’s a power shift.
Buyers still need coffee, but now they have to chase the market. Traders, caught in the middle, play it safer than ever, making the system even tighter. Producers are still not kings, but at least they have a seat at the table now.
Why This Time Feels Different – A Perfect Storm ?
This isn’t just another price spike. It’s a shift in how the market functions, amplified by conditions that weren’t there before.
Buyers, structurally short, have lost flexibility. They must keep buying, no matter what happens. In the past, they could delay purchases, knowing farmers would eventually sell. But now? Stocks are too low. Each delay only increases the pressure down the line. Without high destination inventories, roasters don’t have the buffer they once did.
Traders, normally a stabilizing force, are stepping back. Extreme volatility, high interest rates, and rising default risks make risk-taking too expensive. Credit lines tighten. Margin calls explode. Hedging becomes more about survival than strategy. The result? Less liquidity. More violent price swings.
Producers, structurally long, have a bit more breathing room. They will always need to sell – this crop, next crop, the one after – but for the first time in years, some of them aren’t forced to sell everything at once. If prices stay high, they can benefit next season. If prices fall, they’ve already locked in good levels.
And then there’s the current situation :
- Activity has already been intense. Coffee has been sold, but instead of sitting in stocks, it is tied up in transit, stretching the supply chain. The coffee exists, but it isn’t immediately available.
- Weather events have reduced supply. Buyers hesitating in previous years could count on availability later. Now, they hesitate, but the coffee isn’t there.
- Market mechanics amplify the swings. Margin calls force traders to adjust positions. Default risks lead to defensive hedging. Intermediaries reduce exposure, unwilling to take on more risk in an unstable environment. Every action taken to reduce risk ends up fueling the cycle.
Occurring after an accumulation of imbalanced and challenged supply and demand year after year.
A self-reinforcing spiral takes over.
Hesitation reduces liquidity. Liquidity shrinks, volatility grows. Volatility grows, buyers delay. Delays push prices even higher.
A high market becomes an even higher market—not just because of supply, but because no one wants to take the risk of stepping in.
The biggest challenge ahead?
The Next Big Question: What Happens to Demand?
Now, analysts start talking about demand destruction.
“Prices are too high.” “Consumers will stop drinking coffee.” “The market will collapse.”
But will it?
Because demand isn’t just one thing.
It’s a thousand different behaviors, shaped by habit, income, convenience, alternatives. Some will cut back. Some will switch to cheaper options. Some will not change at all.
Fund operators in the US and Europe who were active in the crude oil futures have switched to Coffee futures after Trump was elected. Trump will not allow any erratic movement in oil, so coffee is being traded heavily by these funds. The coffee trade is just part player. Speculating on the future weather conditions can be done on any agriculture commodity.
I am a great fan of all things from Coorg – the people, produce, customs, sport and of course being from Punjab – we have so much in common. I always look forward to such articles through Coffeeland Online.
I read both the articles with great interest as everyone knows that two of the most famous brands of Coffee – iIli and Lavazza (there are perhaps twenty more iconic brands) are from Italy. The Italians have over decades mastered the art of Roasting and creaming the profits from their sale of branded coffee.
I could argue that mere branding is not everything. The number of viable neighbourhood cafes that exist across Europe are dime a dozen. But during a recent visit to Coorg there were virtually no good small artisanal cafes. The most prominent brand is Ainmane run by an enterprising Kodava where he sells very good coffee as well as other local produce. Big Cup in Madikeri is another exception and it is run by a non-Coorg – good for them.
So how does one motivate my Kodava friends to tap this market opportunity which is ideally suited for Smaller and Marginal Farmers. A sense of entrepreneurial encouragement is required with no substitute for hard work. After all, running a coffee plantation is a seasonal activity and while it provides a “good life”, one has to earn the means to lead such a life by augmenting income. We Sardars showed the way for dignity of labour and purposeful enterprise. Add Value to Coorg Coffee and other produce – it is the rare shade grown coffee in the world with unique flavours, lovely environment and a great story!!
Price will definitely come down anytime because India contribute just 6%of world production. Its just the matter of weather support to highest producing like Brazil, vietnam which contributes more than 80% of world production,to boost back.
With this price people should focus on converting into cash reserves to sustain farming in future low price to afford Rs.45000/ per acre maintanence cost at any given time.If that is not done sale of land will increase in future.
Very informative and an easy style of communication. The small coffee farmer in Kodagu is at the mercy of the local Traders. They seldom have “holding” capacity and the entire margin upside devolves to the credit of the middlemen – pre-export.
Any attempt to collect coffee prices for farm gate sales is a traumatic nightmare. As the previous article suggests, it’s a non- exercise.
Wonder if the Coffee Board, KPA, CPA – the latter two who represent the direct interest of the Planters can proactively provide a price tracker for all the kinds of coffee that is sold at the farm gate. Additionally, a much better and transparent “collection, storage and price realisation” can be attempted by these agencies rather than depending on the obfuscated trading methodologies of the present day traders – who don’t provide any security for the inventory to the planter.
CUP FOR THOUGHT!