Coming coffee glut may not be enough to calm price volatility

After years of shortages, the world is finally getting more coffee but depleted stockpiles have kept the price volatile. Photo by Getty Images / IStockphoto

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After years of shortages, the world is finally getting more coffee. The question is how much of it will reach the exchange warehouses that underpin prices across the industry.

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The market for arabica coffee has been unusually volatile this year, due in large part to a deeply depleted repository of beans available to settle expiring futures. Exchange-certified stockpiles have fallen to their lowest point since 1999, helping push prices close to their highest levels this year, near $3.50 a pound.

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Those stockpiles need to rebuild for prices to become more stable. Otherwise, coffee roasters — and ultimately consumers — could remain exposed to sharp price swings even as global supplies improve.

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On Friday, futures in New York surged as much as 5.6%, on track for the biggest weekly gain since July 10.

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There should be plenty of beans to go around: The 2026-27 season is widely expected to produce the biggest surplus in years, helped by a potential record crop in top grower Brazil. But traders and analysts are unsure whether current futures prices offer enough incentive to send those beans into exchange-managed warehouses rather than private stocks.

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Exchange deliveries were a “slam dunk” when the premium for delivering coffee sooner rather than later was higher, said Judy Ganes, president of J. Ganes Consulting and a veteran commodity analyst. “The math changed, and all of a sudden it didn’t make sense to deliver as much of that.”

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The distinction matters because exchange warehouses act as a backstop for the coffee industry. They absorb beans when other buyers show little interest and provide a readily available reservoir when supplies become scarce. Roasters have drawn heavily on that reservoir and are now actively buying beans in the physical market at higher prices, intercepting supplies that might otherwise reach the exchange.

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Growing private inventories would still be good news for roasters and consumers after years of shortages and record prices. But without a significant recovery in exchange stocks, futures could remain volatile. Prices may have to rise to encourage more deliveries, potentially forcing traders with short positions to buy back futures and amplifying the rally.

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“There’s the possibility that someone gets squeezed,” Ganes said.

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That can ultimately feed through to the price of a latte. Futures serve as a basis for the prices that many roasters pay for beans, with their final cost typically based on the futures price plus a premium or discount for quality. Consumers are still feeling the pinch of a historic run-up in coffee costs over the last two years, and Folgers maker JM Smucker Co. has cited elevated futures as a reason for delaying plans to cut prices.

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The looming threat of cheaper coffee, though, means the exchange should already be an attractive destination for some beans, according to Oliver Broster, senior manager of coffee analysis at Expana.

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Some has already arrived. More coffee from Brazil entered certified stocks in September than in each of the prior 18 months. But the sudden influx of tens of thousands of bags sent futures plunging, and arrivals have since slowed.