Coffee is one of the most traded commodities in the world—right up there with oil and gold. It’s a $100+ billion industry, fueling economies, supply chains, and, of course, our morning routines. But lately, coffee has been making headlines for a different reason: its price has been skyrocketing.

Coffee futures have surged over 30% year-to-date, hovering near all-time highs. If you’re an investor, that might make you wonder—what’s causing this price jump, and is there an actual investment case for coffee? Let’s break it down.

Why Are Coffee Prices Surging?

A lot of things can shake up commodity markets, and coffee is no exception. The recent price spike is a classic example of supply and demand in action, with a few key drivers pushing prices higher:

1. Climate Issues in Major Coffee-Producing Countries

Brazil and Vietnam—two of the world’s biggest coffee exporters—have been hit hard by extreme weather. Brazil had its hottest year on record in 2024, with severe droughts and forest fires damaging arabica coffee crops. Meanwhile, Vietnam, a major producer of robusta beans (the kind used in instant coffee), has seen drought conditions impact supply. Less coffee produced = higher prices.

2. Inflation and Rising Costs

Inflation isn’t just hitting grocery store shelves; it’s squeezing every part of the supply chain. Coffee producers are facing higher costs for labor, shipping, and production. And when costs go up, companies pass them on to consumers, which is why your morning latte might be getting more expensive.

3. Supply Chain and Hedging Strategies

Unlike smaller coffee roasters, big players like Starbucks hedge their coffee prices by purchasing futures contracts well in advance. This means they lock in prices before fluctuations hit, shielding them from immediate spikes. However, as current contracts expire and new ones are negotiated at today’s higher rates, even these big companies may have to adjust prices.

Can You Invest in Coffee?

Yes—but not in the way you’d invest in stocks. Coffee is a commodity, which means it’s primarily traded in futures markets. Here are a few ways investors gain exposure to coffee prices:

1. Coffee Futures (KC=F)

The most direct way to trade coffee is through coffee futures contracts on exchanges like the Intercontinental Exchange (ICE). These contracts allow traders to speculate on future coffee prices, but they come with high volatility and risk—futures trading is not for beginners.

2. Coffee ETFs

For a less hands-on approach, there are exchange-traded funds (ETFs) that track coffee prices. Examples include:

• iPath Series B Bloomberg Coffee Subindex Total Return ETN (JO)

• WisdomTree Coffee ETF (COFF.L) (for UK investors)

These ETFs offer exposure to coffee prices without requiring direct futures trading.

3. Stocks of Coffee Companies

Investing in coffee-related companies is another route. Companies like Starbucks (SBUX), Keurig Dr Pepper (KDP), and Nestlé (NSRGY) are major players in the coffee industry, with business models that are less volatile than raw coffee prices.

4. Agricultural and Commodity Funds

Broad-based agricultural ETFs often include coffee along with other commodities like wheat, corn, and soybeans. These funds can provide diversified exposure to soft commodities without betting on a single crop.

Is Coffee a Good Investment?

This is where things get tricky. Unlike stocks, which generate earnings and dividends, commodities don’t create long-term value on their own—their price depends entirely on supply and demand.

Coffee has had massive price swings in the past. For example:

• In 2011, coffee prices peaked at $3 per pound due to supply shortages.

• By 2013, prices crashed below $1 per pound.

• In 2022, they spiked again due to global supply chain disruptions.

Right now, coffee is in a “perfect price storm” due to supply shocks and inflation. But markets are cyclical—eventually, production will stabilize, and prices could retreat. That makes coffee a risky bet for long-term investors, though traders and commodity specialists may see short-term opportunities.

Food (Or Drink) for Thought

Coffee is an essential global commodity, and its recent price rally is driven by real economic factors—climate issues, inflation, and supply chain disruptions. While investors can gain exposure through futures, ETFs, or coffee-related stocks, the volatility of commodity markets makes coffee a speculative play rather than a core investment.

For most investors, commodities like coffee work best as a small part of a diversified portfolio, rather than a primary investment strategy. But if you’re fascinated by the global coffee market, its price swings, and the economics behind it, it’s definitely a space worth watching.

Disclaimer: The information presented is for educational purposes only and not an offer or solicitation for any specific investments. Investments involve risk and are not guaranteed. Consult with a financial adviser before making any investment decisions. Past performance does not guarantee future results.