Dubai, September 9, 2025 (Qahwa World) – Coffee prices are once again on the rise, pushing global markets into a renewed bullish phase after months of volatility and decline. Analysts point to a mix of climate pressures, trade barriers, falling inventories, and speculative buying as the key forces driving the market upward.
Arabica coffee futures on the Intercontinental Exchange (ICE) climbed above $3.70 per pound in early September 2025, nearing record levels last seen at the beginning of the year. This rebound followed a sharp downturn during the first half of 2025, when prices fell by 19.22% in the second quarter and dropped 4.07% overall in the first six months, closing June at $3.0675 per pound.
On July 8, 2025, the December Arabica contract reached its lowest point of the year at $2.72 per pound. From there, the market staged a dramatic recovery, rallying nearly 43.9% to $3.9130 by August 28. The turnaround signaled a renewed long-term bullish momentum for coffee.
Climate Concerns Put Pressure on Supply
Brazil, the world’s largest coffee producer, is facing challenging weather conditions, including drought in some regions and unusually cold temperatures in others. These climate issues have heightened concerns about reduced crop yields in the upcoming harvest.
At the same time, ICE data shows that open interest in coffee futures rose 11.5% between August 12 and August 28, climbing from 146,352 to 163,170 contracts, highlighting increased speculative activity. Meanwhile, ICE coffee inventories fell to multi-year lows, further tightening global supply.
Tariffs Fuel the Rally
Adding to the pressure, the United States has imposed additional tariffs on coffee imports from Brazil and Vietnam, the two largest exporters. These trade barriers have raised costs for roasters, while well-capitalized Brazilian farmers have held back sales, using the tight market to strengthen their negotiating position. The result has been an acceleration of the rally in coffee prices.
Starbucks Feels the Impact
Rising green coffee costs are weighing directly on Starbucks, one of the world’s biggest buyers. While U.S. equity markets reached new highs in August, Starbucks shares underperformed. From March 3 to September 5, 2025, the stock fell 27.5% from $117.46 to $85.06, before closing at $85.32—6.4% below the year-end 2024 level. Analysts point to rising input costs, particularly coffee, as a major factor behind the decline.
Lack of Investment Vehicles
Since the iPath Coffee Subindex ETF ceased trading in June 2023, investors seeking direct exposure to coffee have had to rely exclusively on futures and options listed on ICE. Each futures contract represents 37,500 pounds of green coffee. At $3.7365 per pound on September 5, the December contract was valued at approximately $140,118.75. With an initial margin requirement of $10,659, traders can control the contract with just 7.6% upfront, though they must meet maintenance margin calls if equity falls below $9,690.
Outlook: Volatility Ahead
Looking forward, analysts expect heightened volatility in the coffee market over the coming weeks and months. Climate challenges in Brazil, tariff-driven trade distortions, and dwindling inventories will continue to keep upward pressure on prices. While the long-term trend remains bullish, sharp fluctuations are likely to remain a defining feature of the global coffee trade.
