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In the past month, the coffee C Price has experienced a dramatic increase from over $2/lb to over $3/lb. The current C price of over $3/lb has reached a historical high over the past 13 years. What is the C Price and what happened with this dramatic increase?
The C Price and Its History
Coffee is a global commodity and is the most traded good in the world. Brazil has been one of the largest producing countries of coffee and Vietnam’s exports have also been rising since the late 20th century. Some other main producing countries include Colombia, Indonesia, and Ethiopia.
The two main types of coffee are Arabica and Robusta. Arabica beans are considered more superior in taste, while Robusta beans are widely used in espressos and instant coffees due to their high bitterness. The C Market is not a spot market where goods are traded “on the spot.” Instead, it trades coffee futures. The coffee market is special because the producers usually exchange the future coffee, thus creating the coffee futures exchange prices. Coffee is also the second most imported good in the world, following oil. Compared to some other goods, coffee prices are rather unstable, subject to political, economic, and environmental influences. The process from farming the crop to bringing green beans to the market could take several months and those factors could affect the yield in this process. To address this concern, the futures contracts are implemented to agree to exchange commodities at a future date while the price is already settled.
The two coffee futures exchanges correspond with the two types of coffee (Arabica and Robusta). The New York International Exchange is posted on the ICE (also known as “the C Market”) and is mainly for Arabica beans. The LIFFE in London is for Robusta. The New York Arabica coffee futures price (on the C Market) is also known as the “C Price” or listed as “KC” in certain stock platforms. The C Price specifically refers to the price of purchasing green beans, which are unroasted coffee seeds that come from the coffee fruit. Though the C Price does influence the entire coffee market, it is not the same as the bag of roasted beans you would purchase in Starbucks.
Before the creation of the C Market, Arabica coffee was traded under the “U” contract (also known as the Universal contract). The C Market was established around 1968 by producers in Central America, in order to differentiate their prices from Brazil. Thus, the “C” refers to “centrals,” instead of “coffee.” For coffee to be traded on the C Market, it must meet specific criteria: it must be Arabica beans, unroasted, produced from one of twenty designated countries, stored in one of eight approved warehouses, and traded in batches of approximately 37,500 lbs. These criteria are in place to ensure the consistency of the market and create a standard for trading green beans. Today, the C Price has expanded beyond Central America and has become a global standard for Arabica coffee exchange.
The Cause of the Change in C price
Since the creation of the C market, the C Price has remained below $2/lb and sometimes below $1/lb. However, starting around April 2024, the C Price broke $2/lb and has begun to rise steadily. Since November 22nd, 2024, the C Price has remained above $3/lb and even reached $3.78/lb on January 31st, 2025.
The main cause of the rise in coffee C Price are the weather conditions in Brazil and Vietnam: the two largest coffee exporter countries. Brazil is currently experiencing the nation’s worst drought in the past 70 years and the current above average temperature is also worsening the situation. It has been reported as the driest weather since 1981. Particularly, one of Brazil’s primary production regions has only received 53% of historical rainfall. Coffee prices are quite sensitive to Brazilian weather: the prices soften when rainfall is anticipated, and hot and dry weather cause the prices to spike. Meanwhile, Vietnam is also suffering from high heats and drought, which affects its crops. The constant typhoon activity in the South China Sea is also a concern for Vietnamese coffee farmers. These extreme climate conditions significantly affected the coffee production output, which thus influenced the C Price.
Another minor factor is the increasing demand of coffee in Asia, given the growing coffee market in China. However, the climate issue in Brazil and Vietnam still remain the main influencing factor of the C Price.
Implications for Coffee Farmers
Although the C Price sets a benchmark for the coffee trade, it acts more as a reference rather than a gold standard. Some farmers, especially smallholding farmers that live in the rural area, do not have the access to or knowledge of the C Price. They also do not own technologies to process the coffee fruits and produce only the green beans, which means that they need to sell the fruits as soon as possible before it turns bad. Thus, sometimes they must accept whatever price is offered to them. Nonetheless, for most coffee farmers in regions where weather is rather stable, the increase in profit due to the drastic price change does have a positive influence. With the increase of almost $2/lb, they will see large improvements in profitability.