How Coffee Prices Are Formed?

The final price of a coffee lot is not defined solely by the New York (ICE Futures) exchange. The international quotation serves as a base reference, but several factors influence price formation, both in the Brazilian physical market and in FOB export operations. At EllerS Coffee, we value transparency in our negotiations and believe that understanding the costs involved is essential to building solid and trustworthy business relationships.

Price Formation on ICE and the Impact of Volatility

ICE Futures US, the New York commodity exchange, is where arabica coffee futures contracts are traded. The price disclosed there reflects the average of buy and sell transactions carried out by financial market agents — such as investment funds, trading companies, and brokers — based on standardized contracts of “C” grade coffee, meaning generic arabica coffees that meet minimum quality requirements.

This price does not represent a specific physical coffee, but rather a reference value that serves as a benchmark for the global market. It is expressed in US cents per pound (c/lb), and each contract equals 37,500 pounds (approximately 250 bags).

The ICE price is influenced by several factors, including:

• Expectations for the current and upcoming harvest (weather, flowering, crop failure)

• Certified stocks in ICE warehouses

• Exchange rate fluctuations, especially USD/BRL

• Actions by speculative funds (large-scale buying or liquidation)

• Macroeconomic news and geopolitical tensions

This highly sensitive environment makes coffee prices extremely volatile. Within a few days, a weather event in Brazil or an economic decision in the US can cause significant swings in futures contracts — affecting the entire chain from growers to international buyers. For this reason, understanding the link between ICE pricing and the physical market is essential for making informed commercial decisions and negotiating with greater confidence.

Physical Market: Price Paid to the Producer

In the domestic market, coffee is traded based on the NY exchange price, adjusted according to lot quality, type, screen size, cup profile, and demand.

The main costs involved include:

• Production and post-harvest processing (washed, natural, pulped natural)

• Transport to the warehouse

• Storage and grading

• Bags and packaging

• Brokerage commission (when applicable)

• Quality spread (difference from ICE base price)

The price received by the producer or cooperative reflects these variables and can change daily due to exchange volatility or supply shortages of specific profiles.

Origination: Connecting Quality, Value, and Market Requirements

Coffee origination is the process of sourcing and selecting lots that meet buyer market requirements. It involves farm visits, relationships with cooperatives and warehouses, sample analysis, and evaluating consistency and availability of coffees with specific profiles.

During this process, certifications required by certain markets — such as Rainforest Alliance, Fairtrade, organic, or private programs (4C, C.A.F.E. Practices, among others) — are also taken into consideration. These certifications add value to the lot because they:

• Ensure traceability and sustainable practices

• Comply with large roaster requirements

• Enable access to specific niches, with higher spreads

• Represent an additional cost to the producer, reflected in the final price

In other words, origination is not only about sensory quality, but also about commercial, documentary, and reputational fit — all of which directly impact pricing.

FOB Price: Ready for Shipment at Port

When we talk about the FOB (Free on Board) price, we refer to the value of the coffee ready for export, delivered onboard the vessel at the port of shipment (such as Santos or Vitória).

In addition to the physical coffee value, the FOB price includes:

• Reprocessing and final preparation of the lot

• Export packaging (jute bags, liners, big bags, pallets)

• Domestic transport (warehouse to port)

• Port charges (handling, port fees, fumigation, inspection)

• Export documentation (invoice, packing list, certificates, DU-E registration)

• Exporter’s margin

Each coffee lot has a unique cost composition depending on its profile and destination.

Conclusion

Understanding market dynamics and all the steps involved is essential for completing a coffee sale.

At EllerS Coffee, we are vigilant in overseeing these processes to ensure that supply and demand meet with balance, sustainability, and good business for all parties involved.