Understanding Coffee Pricing: The C Price and Its Implications

Recent headlines have highlighted the soaring prices of coffee, particularly as the near-futures coffee prices on the Intercontinental Exchange (ICE) have reached unprecedented highs—hovering around $4.03 per pound. This surge raises an essential question: What does the price of coffee actually signify?

For different individuals, the term "price" may evoke distinct meanings. For one person, it could represent the cost of a vanilla latte at a local café, while for another, it may relate to the price of freshly picked coffee cherries being loaded for transport. Between these two extremes lies a complex spectrum of price points throughout the coffee supply chain, each representing a moment where a price is set and agreed upon by multiple stakeholders.

The Spectrum of Coffee Pricing

Numerous price events occur within the journey from seed to cup in the coffee industry. Some of the most common pricing examples include:

• Unprocessed Coffee Prices: Farmers receive payments at post-harvest processing mills.
• Baseline Prices: Established by government agencies in coffee-producing countries or certification bodies like Fairtrade.
• Commodities Markets: Green coffee prices are benchmarked on various commodities exchanges.
• Reference Prices: Set by intergovernmental agencies such as the International Coffee Organization.
• Trade Prices: These include "spot" prices and FOB (Free on Board) prices that traders and roasters use.
• Retail Prices: These are the consumer prices for packaged coffee products, such as 12-ounce bags or single-serve pods.

  Despite the multitude of pricing mechanisms, many in the professional coffee sector continue to refer back to a single, widely recognized benchmark known as the "C price." This benchmark is often seen as a reference point for the coffee market, albeit a somewhat controversial and misunderstood one.

  What Is the C Price?
  

  In essence, the C price serves as a benchmark for green arabica coffee, which is generally regarded as a higher quality than robusta coffee. The "C" in "C price" originally denoted "Centrals," reflecting the historical efforts of Central American coffee producers to distinguish their products from those of Brazil.

  Today, the C price is a contract specification for green coffee futures traded on the ICE in New York. In this context, traders engage in futures contracts where they speculate on the future price of arabica coffee, agreeing to exchange a specified quantity at a predetermined price. This trading activity establishes the C price as a reference for the broader coffee market.

  Historical Trends in the C Price
  

  The coffee market, like many commodity markets, is cyclical. Historical trends reveal periods of sharp price increases followed by significant declines, often driven by shifts in supply, demand, weather conditions, and broader economic influences. The price of coffee has experienced "boom and bust" cycles, where high prices lead to increased production, which eventually results in lower prices.

  Before 1989, the coffee market operated under a series of International Coffee Agreements (ICA) designed to stabilize prices through a quota system. However, the U.S. withdrawal from the agreement led to a free-market environment characterized by extreme price volatility. Key periods in the recent history of the C price include:

• 1989-1994 & 2000-2004: Following the collapse of the ICA, coffee prices plummeted, resulting in a series of price crises where prices remained below $1.00 per pound for extended periods.
• Early 2010s: A significant rise in prices occurred due to the impact of coffee leaf rust disease, which severely affected production in various regions.
• 2017-2020: Another crisis emerged as the C price fell below $1.00, significantly impacting producers.
• February 2025: For the first time, the C price exceeded $4.00, making headlines across multiple media outlets.
  

  The Influence of Speculation on Coffee Prices
  

  The C price is not merely determined by the physical exchange of coffee. Instead, it is significantly influenced by market participants who may never engage with the actual commodity. Hedge funds, large investment firms, and individual speculators buy and sell coffee futures based on market forecasts or technical analyses. These speculative actions can amplify price movements, sometimes causing the C price to deviate from traditional supply-and-demand fundamentals.

  The Arbitrary Nature of the C Price
  

  While the C price is central to the global coffee trade, it remains somewhat arbitrary. Its fluctuations are often driven by the actions of futures traders and financial institutions, whose motives can range from risk hedging to seeking short-term profits. Consequently, sudden shifts in investor sentiment can impact the price, leading to instability for producers and buyers alike.

  As we move into 2024, coffee prices—particularly the C price—are likely to remain a focal point in consumer markets. However, it is crucial to recognize that the C price, as a man-made benchmark, does not necessarily reflect the realities faced by coffee farmers, roasters, or consumers who appreciate coffee for more than just a set of financial figures.

  In summary, the C price serves as a vital reference point within the complex world of coffee pricing, but it is shaped by a myriad of factors, both tangible and speculative. Understanding these dynamics is essential for anyone engaged in the coffee industry, whether they are producers, traders, or consumers.