Coffee stands out for its cultural importance and market volatility. With more than 2 billion cups consumed daily, this everyday ritual is underpinned by a complex market influenced by fluctuating demand, climate risks, global supply chains, and capital movements.
Coffee’s journey from a forest shrub in Ethiopia to one of the most actively traded soft commodities is a story of trade, taste, and transformation. Today, over 80 countries grow coffee, with Brazil, Vietnam and Colombia leading global exports.
Two varieties dominate: Arabica, valued for its nuanced flavour; and Robusta, prized for its resilience and higher caffeine content. Together, they underpin a market that connects small farms with trading floors in New York and London.
More than just a beverage
Historically, coffee has been more than just a beverage. In the aftermath of the Boston Tea Party, it symbolised political resistance and independence in the United States, breaking away from colonial ties. This legacy endures, with coffee continuing to shape routines, identities, and values.
Alongside its cultural significance, coffee is an important financial commodity traded on global exchanges. The Intercontinental Exchange (ICE) serves as the key market for Arabica.
The benchmark KC price reacts quickly to climate events, currency fluctuations, economic shifts, and investor positioning. A frost in Brazil or a drought in Vietnam can send prices surging.
At the same time, currency moves in key producing countries, such as the Brazilian real or Vietnamese dong, can alter the economics of supply overnight.
Vietnam’s Robusta production, for example, is forecast to rise by 7% in the 2025/26 season, reaching 31 million bags. Meanwhile, Brazil’s frost season continues to cast uncertainty over Arabica yields.
As with other soft commodities, coffee’s pricing mechanisms are complex, but its reaction to supply shocks can be immediate and sharp.
Coffee's volatility presents both challenges and opportunities for investors. It is often uncorrelated with traditional assets, making it a good diversifier for multi-asset portfolios. Its sensitivity to inflation, weather, and emerging market trends offers tactical investment opportunities.
From bean to cup
Coffee prices reflect a vast network of human effort. Around 70% of the world's coffee is grown by smallholder farmers, often in precarious conditions with limited financial resources or market information.
The journey from bean to cup includes many stages – harvesting, processing, grading, certification, export, roasting, packaging, and distribution. Each step is vital, and transparency is increasingly important.
Certification schemes like Fairtrade and Rainforest Alliance have gained traction, not only as marketing labels but as real frameworks for better practices and more stable incomes.
For investors focused on environmental, social and governance (ESG) integration, this matters. Traceability, sustainable farming, labour rights and water use are no longer peripheral – they are central to assessing long-term value and risk.
New coffee cultures
Consumer preferences are also changing the equation. While Europe and North America continue to lead in per capita consumption, the strongest growth is coming from Asia and Africa, where urbanisation and rising incomes are creating new coffee cultures.
Younger consumers are driving a shift towards quality, sustainability and digital convenience. They want single-origin beans, lighter roasts and ethical sourcing – and they are willing to pay for it.
Specialty coffee is one clear beneficiary. It now represents nearly 20% of global retail sales and is expanding rapidly.
Digital channels are amplifying this growth. Direct-to-consumer platforms and subscriptions connect roasters to global buyers, support niche producers and enable more equitable economics along the chain.
This behavioural shift is a retail story and also reflects structural forces shaping the commodity landscape. Coffee sits at the intersection of climate exposure, supply-chain transformation and shifting consumption patterns. It offers a lens through which to view real-world macro risks and opportunities.
Brewing gains
Of course, coffee markets are not without risk. Prices are highly sensitive to environmental shocks, pests, logistics bottlenecks and regulatory changes.
While specialty markets show promise, they can lack liquidity. The storage and transport of physical commodities involve operational complexities. Investors must carefully manage these exposures.
Few commodities combine cultural significance, economic importance, and sustainability like coffee. While it is volatile, coffee is deeply ingrained in daily life, global trade and the rise of conscious consumption. Its investment relevance is structural rather than a passing trend.
As demand patterns evolve and sustainability expectations rise, coffee’s low correlation to traditional asset classes makes it a relevant consideration within a broader, diversified commodities allocation.
George Cotton is portfolio manager of the JSS Transition Enhanced Commodities fund. The views expressed above should not be taken as investment advice.