Coffee Price Crisis Deepens as Margin Calls Hit Exporters and Cooperatives

As global coffee prices soar to historic levels, another silent yet powerful force is putting unprecedented pressure on exporters and cooperatives in producing countries: margin calls.

While consumers celebrate favorable prices for roasters and retailers, many producers and ethical traders are facing financial distress due to the impact of financial mechanisms tied to futures contracts. The situation threatens to destabilize fragile coffee supply chains and erode years of progress in sustainable and fair trade.

Financial Shock Behind the Scenes

A margin call occurs when traders who hedge future coffee sales using commodity exchanges are asked to deposit additional funds after market prices move against their positions. These calls must be met within a short timeframe—typically 24 hours—or positions are liquidated at a loss.

In 2024, Arabica prices on the Intercontinental Exchange (ICE) rose sharply, from $1.90 per pound to over $3.80 within 12 months. For many hedgers, this triggered massive cash demands.

One cooperative in Honduras, for example, had locked in export prices at $2.00/lb to secure predictable income for its producers. But as market prices doubled, its short futures positions became unsustainable. The cooperative received a margin call of $1.80/lb—amounting to over $2 million USD in immediate payments for 10,000 bags, or around 600 metric tons of coffee.

Lacking access to liquidity or emergency credit, the cooperative was forced to close its position at a loss and default on physical delivery contracts.

Small Players Bear the Brunt

The unfolding crisis is hitting smaller exporters, cooperatives, and ethically focused supply chains hardest:

• Small and medium exporters face margin calls that exceed their cash reserves.

• Producer cooperatives struggle to respond quickly to fast-moving financial obligations.

• Ethical supply chains risk breakdowns in traceability and delivery commitments.

• Local banks are growing increasingly reluctant to finance hedged contracts, citing volatility.

Despite record prices, many producers are not benefiting—either because they sold forward at lower prices, or because intermediaries have exited the market due to financial stress.

Winners in a Shifting Market

While small players falter, some market actors are gaining ground:

• Large trading houses can absorb margin calls and expand their market share.

• Speculators with long positions profit as prices rise.

• Roasters holding pre-crisis forward contracts enjoy cost advantages.

• Unhedged smallholders may see higher returns—if buyers agree to pay spot prices at origin. However, this is often inconsistent and unreliable.

A Broken Safety Net?

Hedging has traditionally served as a tool to manage price risk. But in the current climate, it’s becoming a double-edged sword. For many coffee sector actors in the Global South, hedging is no longer viable without strong financial backing.

“In today’s volatile market, the question is no longer how to hedge,” says Cantergiani, “but who can afford to hedge?”

Without reforms or new financial safety nets, the coffee trade could see a wave of defaults and consolidation—threatening diversity, sustainability, and the livelihoods of producers worldwide.

By Ennio Cantergiani, Owner and Managing Director of l’Académie du Café – Switzerland