In the autumn of 2024, the price of coffee reached record highs and remained higher than ever before throughout 2025. Why is that? I made two videos on the subject, initially identifying the poor harvest in Brazil as the root cause, and only later pointing to excessive speculation. (Video from January 2025) and an update in November 2025.
In the meantime, I kept reading and hearing that this unprecedented rise was the direct product of commodity speculation and that many of the strong fluctuations were not rationally explainable.
Attributing all the movements to "speculation" seemed unconvincing to me, and above all, imprecise. Up to that point, I felt the word more than I understood it. So I wanted to know more and embarked on an intensive learning journey.
At the beginning of this learning journey, I really only had one question:
- Who makes the price of coffee?
- And why does it sometimes move so sharply up or down, even within a single day?
I wanted to know if what we keep hearing is really true: That speculation distorts prices. That investors drive the market. That speculation is the catalyst for upward or downward movements.
And I also wanted to know if we are making life harder for ourselves than it needs to be. Whether the idea that "the speculators" are to blame is correct. Or whether we are just using this idea to avoid understanding a more complicated system.
"Speculation is to blame!"
Since the rise in raw coffee prices on the stock exchange (the so-called C-Market) in November 2024, I have studied this topic more intensively than ever before in my coffee career. At first, it was about understanding exactly what was happening, how we as a coffee roastery can find our bearings, what this means for producers, and how we can develop a vision together.
And at some point, I kept hearing more and more that this was all the work of “speculators.” When the head of Lavazza said in the summer of 2025 that 80% of the movement came from hedge funds, I nodded at first, but then became skeptical – and above all, curious. “Speculation” doesn’t explain anything at first; it tends to fuel emotions.
"Speculation serves many as an approach to explanation when there is a lack of explanations."
So I sat down, listened, and asked questions. To people who trade coffee. To people who produce coffee. And to analysts who have been observing commodity markets for decades.
The deeper I went, the clearer it became: there is no simple story. But there are many layers.
What is speculation? About futures, shorts, and longs
I wanted to understand the mechanics behind coffee price formation and coffee speculation. So I spoke with Heinz Zimmermann, professor emeritus of financial market theory in Basel. He said a sentence that would stay with me:
"Speculation is not the problem. Excessive speculation is the problem."
Because: Speculation serves a function. It is part of the counterparty for producers who sell futures to protect (hedge) their prices against downward movement (lower prices).
An example:
If twelve producers want to hedge their harvest and sell futures (a future is a contract that dictates that someone must buy or sell a certain amount of coffee at a certain price in the future), but only three roasters want to buy, an imbalance is created. Speculators fill this gap. Or as Heinz Zimmermann says: "Producers want to get rid of risk. Speculators take on risk."
When producers hedge a lot (protect themselves against falling prices) and sell futures, more open positions are created. And these have to be bought. These can be so-called commercial actors, i.e., traders or roasters. But if they do not buy, speculators take their place. In stock market parlance, they are now going long, while the hedging producers are going short.
For there to be a balance here, so that the market functions at all, the offers must be met by demand. And speculators take on these open positions.
How do speculators make money?
The interest of speculators is purely monetary. For them, it is not about the physical product of coffee, but about making a financial profit.
This profit arises when there are changes in the coffee market. Whether prices go up or down is secondary: the profit results from the change in price.
Whoever buys at a lower price and sells higher makes a profit, as does someone who expects falling prices. Then speculators go short, selling a future at a high price that they do not yet own.
If the price falls later, they buy the future back cheaper. Here, too, the difference is the profit.
This movement, or volatility, is the magnet for speculators. But too much volatility is also not attractive to them, Judy Ganes told me.
When speculation becomes too much: excessive speculation
I wanted to know from Judy Ganes who is actually speculating there? Judy Ganes worked on Wall Street for a long time, has been following the commodity markets for decades, and says:
"Speculators are the scapegoat. Always."
Judy Ganes
She does not believe the thesis that private investment funds ruin the market. She says speculators amplify movements, but they don’t invent them. Everything begins in the cash market, in physical reality.
Excursus: the cash market: Here, real, physically available raw coffee is traded. Unlike the futures market, the cash market is about immediate delivery and actual demand today, not in the future.
Judith further explains that speculation can be an amplification of already existing trends. And at the same time, viewing it through Heinz Zimmermann’s lens, I see: amplification is not harmless. Amplification can destroy more than the trigger itself.
If a frost threatens, that is a so-called fundamental factor. But if billions flow into the market within minutes because algorithms recognize a correlation, then the market has not only reacted, it has overreacted.
Heinz phrases it soberly: "The volatility is higher than what would be fundamentally necessary." And that is the point at which speculation becomes excessive speculation.
How volatility feels at the coffee origin
Volatility, the constantly changing state, is to a certain extent interesting for speculators on the one hand. Roasteries become hesitant when purchasing, because a small price shift can have a big impact on placing an order for a client. For producers, on the other hand, volatility is a test of nerves and a strain.
The coffee will be harvested soon or has just been harvested. But at what price do I, as a producer, sell the coffee now? Or rather: When do I sell it when the price is constantly changing? And who buys it when?
Many producers were willing to sell coffee in recent months, but buyers did not want to buy. Thus, it happened, César Marin reports in the podcast, that producers even had two harvests on hand and were waiting for someone to buy their coffee.
César also says that the price of coffee determines whether a producer in Peru can finance their harvest. It decides whether a cooperative loses loyal members or an entire region gets new buyers who show up with cash that no one expected.
Miguel Guevara
High volatility is difficult for everyone involved in the coffee chain because it does not allow for long-term planning without high risk.
Miguel Guevara from our partners at Ensambles in Mexico assesses the situation for micro-producers as follows:
"La gente de cereza se la pasa revisando diario la bolsa."
The producers who sell coffee in cherries look at the New York coffee price every day. "Every day." Producers who sell their coffee in parchment/pergamino, on the other hand, live in a different timeline. Prices are adjusted more slowly there, and the volatility arrives in a dampened state. "But it always comes."
Excessive speculation and the resulting volatility therefore do not just change the macro level and the C-Price rapidly; they change the pace at which people on the ground make decisions. But above all, it creates uncertainty: Whether producers sell today or tomorrow and whether they remain loyal to a cooperative or not.
And that is a stark contrast:
On one side, we have market participants who make short-term decisions on a screen, the effect of which, however, affects thousands of kilometers away in coffee countries. It is striking that a decision on a screen is made quickly, but agriculture is slow. It takes three years for a coffee tree to bear fruit. So these are two completely different worlds facing each other, but they are connected by the coffee market.
"Coffee doesn't wait"
One of the sentences that stuck with me on this journey came from producer and friend César Marin from Peru. He said: "El café no espera." Coffee doesn't wait.
When I heard that, I didn't yet know how central this sentence would become. But suddenly it stood as a symbol for everything that can happen in the coffee market when prices rise or fall in a very short time.
César told me what it was like in his region around Villa Rica in 2025. The harvest was there, the coffee cherries were ripe, but no one wanted to buy.
"There was coffee," he says. "But no one was buying coffee."
Producers had picked and processed coffee, but there were no buyers because the collection centers in the region were closed. And so there was this stalemate: The sellers (the producers) wanted to sell coffee because prices were high. The buyers (e.g., the collection centers) did not want to buy coffee because the price was too high for them.
At the same time, new buyers suddenly appeared, and no one knew who they represented. Collection centers that were paying 450 to 470 cts/lb per pound of pergamino - those were prices never seen before. César says: "I believe these were firms from Colombia, Honduras, and Brazil." Firms, therefore, that could not buy enough coffee from their own markets and therefore came to Peru to cover their demand.
Why the industry cannot just watch
I also spoke to people who buy coffee in large quantities: the head of purchasing of a large European retailer, as well as the raw coffee buyer of one of the largest roasteries in Europe. When it comes to volume, the leverage downwards and upwards is greater.
"Volatility can destroy your bookkeeping," says the head of purchasing.
"If you buy 20,000 tons of coffee and the price fluctuates by twenty or thirty cents in a short time, that's millions in value." The raw coffee buyer confirms this statement:
"There are always winners and losers. But the problem is not the price. The problem is the speed."
He gave me this example: If competitor A makes a contract for raw coffee at 4.25 USD/lb (approx. 9.37 USD/kg) and competitor B buys at 4.10 USD/lb (approx. 9.04 USD/kg), then that determines competitiveness and thus the awarding of orders.
The industry is trying to adapt. Purchasing is now sitting much closer with Sales and the Finance department. And the customer themselves is also being included in the planning.
The strong fluctuations and high prices have ensured that there is more money in the market than ever before. Traders are also reaching their limits, as they buy coffee first and sell it later in their commercial capacity. They also borrow the money to do so. The amounts of money have increased massively since November 2024. David Neumann also comments on this in this podcast episode.
Why speculation is necessary — but remains dangerous at the same time
After this long journey, I am not standing here saying: Speculation is the problem. But I am saying: Excessive speculation is a problem. And a serious one at that.
Speculation is necessary so that producers can hedge their prices. Without speculators, there would be no functioning futures market. But when capital inflows become too large, when models blindly amplify trends, when liquidity does not stabilize but accelerates, then producers, traders, cooperatives, and also roasters become extras in a market that moves faster than any real decision.
It is often said that the market is always right. I would say: The market always has an outcome. But whether it is right only becomes apparent later.
And this "later" is often the next harvest.
