Coffee

What it is

Coffee is produced from the seeds of Coffea plants in two dominant commercial varieties: arabica (Coffea arabica), which accounts for roughly 60 percent of global output, and robusta (Coffea canephora), which makes up the remainder. Arabica, grown at altitude in Brazil, Colombia, and Ethiopia, commands a price premium and trades as a distinct futures contract on ICE Futures US in New York. Robusta, dominant in Vietnam and Indonesia, trades on the London International Financial Futures Exchange. Around 25 million farming households produce roughly 80 percent of global supply, concentrated in the southern hemisphere tropics. The two largest importers are the European Union and the United States. The International Coffee Organization (ICO), headquartered in London and founded in 1963, publishes the monthly ICO Composite Indicator Price, the standard global benchmark, and administers the International Coffee Agreement among member governments, which represent 93 percent of world production.

History

Arabica coffee originated in the highlands of Ethiopia, spreading through Yemen in the 15th century and, via Ottoman and then European colonial trade networks, to the Americas by the 17th century. Brazil became the world's dominant producer by the 19th century. Export quotas under successive International Coffee Agreements from 1962 onward stabilized prices for three decades, but the quota system collapsed in 1989, triggering a sustained price slump through the 1990s that devastated smallholder incomes across Central America and East Africa. A specialty-coffee market, built around differentiated arabica and sustained by chains such as Starbucks, rebuilt premium pricing from the late 1990s. Supply constraints and climate stress in the 2020s drove arabica to a historic peak of approximately US$4.41 per pound in February 2025.

Current state

As of mid-2026, global coffee output is at a record high. The USDA's May 2026 circular forecasts 2025/26 world production at 178.8 million bags, with consumption at 173.9 million bags, continuing to draw down global stocks for a fifth consecutive year, to 20.1 million bags. Brazil's 2026/27 crop, currently being harvested, is projected at 71.9 million bags by the USDA, a potential record, though heavy rains delayed collection in the first half of 2026. Prices are correcting from the 2025 peak. The World Bank's April 2026 outlook projects arabica to fall 13 percent in calendar 2026 and a further 5 percent in 2027. The ICO Composite Indicator Price averaged 296.89 US cents per pound in January 2026, well below the 2025 high but still above the 2015-2022 decade average. Elevated global food commodity costs in 2026 have complicated roaster pass-through decisions.

Relationships

Coffee price cycles are tightly coupled to Brazilian growing-season weather, which in turn tracks El Niño and La Niña patterns; see NOAA宣布厄尔尼诺来袭，可可和热带作物市场提前应对可能的"超强"事件. A 2023/24 La Niña improved moisture conditions in Brazil's Minas Gerais and São Paulo states, contributing to the record 2026/27 crop. Vietnam's robusta sector is sensitive to rainfall in the Central Highlands, where a 2023/24 drought crimped output and helped drive the 2024-25 price spike. The European Union's Deforestation Regulation (EUDR), which entered its enforcement phase in late 2025, requires all coffee importers to the European Union to verify deforestation-free supply chains, adding compliance costs that fall disproportionately on smallholder cooperatives in Brazil and Indonesia.

What to watch

• The final 2026/27 Brazil harvest estimate from the USDA, scheduled for release July 22, 2026, and how quickly surplus volume clears to export ports.
• Whether Vietnam's robusta recovery reaches forecast levels, softening the robusta-arabica price spread.
• EUDR enforcement: whether the European Union grants further phase-in extensions for smaller producers or begins formal action against non-compliant importers.
• ICO monthly composite prices through Q3 2026 as the record Brazilian crop enters the export pipeline.
• US tariff policy on coffee imports, flagged by the World Bank as a material risk to 2026/27 price projections.