Why is Coffee Back in Bullish Mode?

It has been a long time since I wrote about the ICE Arabica Coffee futures market. In a September 2025 Barchart article, I concluded with the following:

Expect significant volatility in the coffee futures market over the coming weeks and months, as supply concerns, tariffs, and low inventories are likely to continue causing high price fluctuations.  

Nearby ICE coffee futures were trading at $3.7365 per pound on September 5, 2025, and rallied to a record high of $4.3795 per pound in October 2025, when they ran out of upside momentum. After falling nearly $2 from the peak, coffee futures found a bottom and resumed a bullish trend in July 2026.

Lots of volatility in the coffee futures market

ICE Arabica coffee futures were in a bearish trend in 2026, falling 37.8% from $3.8385 on January 8 to a low of $2.3885 per pound on June 9 when it found a significant bottom. 

The daily continuous contract year-to-date chart shows that coffee futures exploded higher over the past month, rising 49.5% to $3.5700 per pound on July 6. The coffee futures made up four months of declines in under one month. 

The long-term quarterly chart dating back to the early 1970s shows that Arabica coffee reached a new all-time high of $4.3795 per pound in late 2025. After the correction that took coffee below $3, the price is back above the 2011 high, the first technical resistance level. 

Brazil is the leading producer. Weather and harvest issues have pushed prices higher

According to Statranker.org, Brazil is the world’s top coffee producer in 2025, accounting for 37.08% of global coffee production. Vietnam was second at a 16.54% share, followed by Colombia, third, producing 8,44% of the beans. Brazil produced nearly as many coffee beans as the next four countries, as Vietnam, Colombia, Ethiopia, and Indonesia produce a combined 37.41%.

Brazil’s 2026/2027 harvest is behind schedule. Heavy rain disrupted the harvest and increased concerns that coffee bean quality had declined. The prospects for lower Brazilian output this year have been bullish for ICE Arabica coffee futures prices. 

Production costs are rising, and global inventories are low

Stubborn global inflation has increased the production costs for most commodities, and coffee beans are no exception. Meanwhile, this year’s harvest issues have caused ICE Arabica exchange inventories to reach an over two-year low of 366,756 bags, creating the potential for supply squeezes that could push prices higher. 

The emerging El Niño weather patterns could trigger extreme temperature shifts and irregular precipitation that could damage coffee tree flowering and the overall Brazilian crop. With the rising prospects of supply shortages, Brazilian farmers have begun withholding beans, storing them for sale when prices rise. 

Meanwhile, the recent price action has attracted a wave of speculative buying, which could exacerbate the current rally over the coming days and weeks. 

Levels to watch in the coffee futures market

The ICE Arabica coffee futures market reached a low of 87.6 cents per pound in May 2019, serving as a launchpad for higher prices. 

The monthly continuous contract chart shows that the coffee futures rose by 400% to the record high of $4.3795 per pound in October 2025. The correction took the volatile soft commodity lower, but it rebounded, falling just short of forming a bullish key reversal pattern in June. Coffee futures fell below the May low, and while they rose above the May high, they closed only 0.75 cents shy of the May 2026 high on June 30. 

Technical resistance is now at the October 2025 record high of $4.3795 per pound, with technical support at the May 2025 low of $2.3885 per pound. There is a lot of room for volatile price swings between the support and resistance levels. At $3.16 per pound on July 7, coffee futures were below the midpoint but had traded above it on July 6.

No ETFs track coffee prices

The soft commodity sector includes Arabica coffee, world sugar, cocoa, cotton, and frozen concentrated orange juice futures. Brazil dominates three of the five, as it is the leading producer of coffee beans, sugarcane, and oranges. Soft commodity prices are highly volatile and can suffer from limited liquidity during price moves, precluding ETFs that track the prices. World sugar is the most liquid soft commodity and the only one with an ETF that tracks its price. The Teucrium Sugar ETF (CANE) is the only soft commodity ETF. 

Without any ETF tracking its price action, participation in the volatile Arabica coffee market is limited to the ICE futures and futures options. Each futures contract contains 37,500 pounds of Arabica coffee beans. At $3.28 per pound, the contract value is $123,000. A market participant can control the value of each contract (on the long or short side) with an original margin deposit of $23,227, or 18.9% of the contract value. The recent price volatility caused the original margin requirement to move higher from 7.9% of contract value. Now, if equity moves below $21,116, the exchange requires maintenance margin payments. Moreover, the exchange can change margin requirements, which are determined by market volatility. Wider price swings will lead to higher and more stringent margin requirements. 

ICE offers put and call options on its Arabica coffee futures contracts. Long options involve paying a premium and are not subject to margin requirements, whereas short options require margin. The margin in the futures and short options creates significant leverage for Arabica coffee market participants. 

Coffee is back in bullish mode in July 2026, which will likely increase trading activity and could lead to wide price swings. Any risk position in ICE Arabica coffee requires a risk-reward plan with stops and profit horizons to protect capital and establish reasonable odds of success.