My Analysis of Coffee Price Increases

My Theorem of Calculus: "For every problem, there is a simple, easy to understand, wrong answer!"

That means it is a complex problem with many variables impacting the price. Nothing can ever be as simple as pointing at one factor as the main or only contributor.

Unlike the oversimplified nonsense in the media, here is a deeper dive into why global coffee prices on green [un-roasted] coffees have risen over 60% in the last 18 months. You may have seen the silliness in the news where, as usual, Trump and Tariffs are the easy target to blame. Tariffs are minor compared to what I uncovered talking with green coffee importers and asking Grok some direct questions.

Before the deep dive, there are a few items that hit the "C Market" [basically the stock market for coffee].

These first bullet points are other factors that caused prices to go up:

Along with the below there are other factors that caused prices to go up:

• Hedge Fund traders manipulate the “C” market to gain a value increase for their clients portfolios. This is huge the last 20 years. It’s somewhat hidden in a lot of retirement / investment funds.
• Covid really messed up the volume in USA warehouses and the government not allowing ships to deliver for months at a time ruined a lot of the incoming bags, so it turns out it wasn’t the weather. Not having large reserves caused huge price jumps.
• Weather has been blamed for a lot of things [frost, drought, rust killing plants] but in reality was mostly a manipulation by governments to raise prices on coffees they exported.
• Covid also caused global price increases on metals, diesel, etc. which are required for coffee farms where the cherries are processed to get the seeds [coffee beans].
• Not sure how all of the items in this paper has affected profit margins fro growers, pickers, processors, exporters.
• Climate change is nonsense that leftists use to shift blame and often is made the main contributing factor in their agenda focused articles. CO2 is what plants are made from. The majority of organic plant material is Carbon. And they release Oxygen into the atmosphere, which is a vital component of the air we breathe. There is very little man made pollution in the regions where the best coffees grow. All the other points in this paper are the big problems.

What is BRICS?

BRICS (originally Brazil, Russia, India, China, and South Africa) is an informal economic bloc of emerging economies that expanded in 2024 to include Egypt, Ethiopia, Iran, and the United Arab Emirates (UAE). Indonesia joined in 2025, bringing the total to 10 members. Collectively, BRICS accounts for about 41% of the world's population, 27% of global GDP, and roughly 25% of global trade. The group aims to foster cooperation among developing nations, challenge Western-dominated financial systems, and promote South-South trade. Its relevance to US trade stems from its size as a trading partner and efforts to reduce reliance on the US dollar (de-dollarization), which could reshape global trade dynamics.

US Trade with BRICS: The Current Landscape

The US has a significant but lopsided trade relationship with BRICS countries. In 2023, US imports from BRICS totaled around $800 billion, while exports to them were about $300 billion, resulting in a substantial trade deficit (primarily driven by China). Key sectors include:

• Imports to the US: Electronics, machinery, apparel, and commodities (e.g., soybeans from Brazil, oil from the Middle East).
• Exports from the US: Aircraft, soybeans, semiconductors, and energy products.

BRICS represents a major source of US consumer goods and raw materials, but intra-BRICS trade (among members) is only about 6-16% of their combined external trade, limiting immediate fragmentation of US supply chains. However, rising intra-BRICS flows—up 56% from 2017-2022—signal growing self-reliance.

Key Ways BRICS Affects US Trade

BRICS influences US trade through economic, financial, and geopolitical channels. Here's a breakdown:

De-Dollarization and Currency Shifts:

• BRICS promotes settling trade in local currencies (e.g., yuan for China-Russia deals, which hit $244.8 billion in 2024) to bypass the US dollar, which dominates over 80% of global trade. Nearly half of intra-BRICS trade now occurs outside the dollar.
• Impact on US: Reduced dollar demand could weaken its value, raising US import costs and inflation. It also limits US leverage via sanctions (e.g., on Russia). However, experts argue the dollar's dominance remains secure due to deep US financial markets and global trust. A proposed BRICS payment system (BRICS Pay) could accelerate this, but a unified BRICS currency faces hurdles like political disagreements (e.g., India opposes it).

Trade Diversion and Protectionism:

• BRICS seeks to boost internal trade to counter US tariffs, which have already cut Chinese exports to the US and slowed growth in Brazil and India. Analysts predict US tariffs could slash US-BRICS trade by up to 90% in extreme scenarios.
• Impact on US: This diverts BRICS exports (e.g., Brazilian soybeans) away from the US, hurting American farmers and manufacturers. Conversely, US firms lose market access in BRICS (e.g., Boeing aircraft sales to China). Higher intra-BRICS tariffs (average 8.4% vs. 1.1% in OECD countries) add friction but encourage bloc-building.

Tariff Threats and Escalation:

• In 2025, President Trump threatened 100% tariffs on BRICS exports to the US if they advance de-dollarization, stacking on existing 10-60% tariffs on China. A broader 10% "BRICS tariff" could cost US consumers $35-56 billion annually in higher prices.
• Impact on US: Short-term, it protects domestic industries but risks retaliation (e.g., BRICS tariffs on US energy/agriculture exports) and global supply chain disruptions. Long-term, it could isolate the US from 25% of world trade, exacerbating inflation and slowing GDP growth.

Broader Implications and Outlook

BRICS challenges US trade advantages like dollar hegemony and low-tariff access, potentially leading to a more fragmented, multipolar world with competing blocs (e.g., BRICS vs. US-led alliances). While immediate effects are modest—BRICS trade with the US grew despite tariffs—the trend toward local-currency deals and protectionism could add 0.5-1% to US inflation by 2030 if unchecked. For the US, engaging BRICS via bilateral deals (e.g., with India) may mitigate risks better than blanket tariffs, preserving access to this massive market. Overall, BRICS amplifies existing tensions but doesn't yet pose an existential threat to US trade dominance.

What is the connection between BRICS, USA, and coffee "C" market price changes?

Overview of the Coffee "C" Market

The Coffee "C" market refers to the futures contract for Arabica coffee traded on the Intercontinental Exchange (ICE), serving as the global benchmark for pricing physical green Arabica beans. Prices are quoted in US cents per pound (USd/Lbs). As of September 25, 2025, the December 2025 futures contract closed at 372.93 USd/Lbs, up 1.22% from the prior day but down 2.89% over the past month. Year-over-year, it's up 36.40%, driven by supply disruptions, weather issues in key producers, and escalating US trade policies. Retail impacts are evident: US ground coffee prices hit $8.41 per pound in July 2025, with overall coffee prices surging 20.9% year-over-year—the largest jump since the 1990s—per the Bureau of Labor Statistics.

BRICS' Role in Coffee Supply

BRICS nations (Brazil, Russia, India, China, South Africa, plus expanded members like Ethiopia, Iran, UAE, Egypt, and Indonesia as of 2025) dominate global coffee production and exports, accounting for over 50% of the world's supply:

• Brazil: World's top producer and exporter (~39% of global production; 69.9 million 60-kg bags projected for 2024/25). Supplies ~30% of US coffee imports (8 million bags annually), mainly Arabica.
• Ethiopia: ~6% of global supply (11.6 million bags in 2025); key for high-quality Arabica, with exports to the US up due to recent variety improvements.
• Indonesia: ~6% (11.3 million bags in 2025), mostly Robusta but with growing Arabica output.
• India: ~4% (3.7 million bags), focused on Robusta; minor US supplier.
• Others (e.g., Vietnam, not in BRICS but often aligned): 17% global (mostly Robusta), facing similar US tariffs.

Intra-BRICS trade in coffee is rising (e.g., Brazil-China deals up 20% annually), fueled by local-currency settlements via systems like BRICS Pay, reducing US dollar reliance from ~100% to one-third in bloc trade. This de-dollarization shields BRICS exporters from US financial leverage but indirectly pressures "C" prices by diverting beans from dollar-denominated markets like ICE.

US Trade Policies and Their BRICS Link

US-BRICS tensions, amplified by de-dollarization efforts (e.g., BRICS Pay bypassing SWIFT), have led to punitive tariffs under President Trump's 2025 "Liberation Day" agenda. These target BRICS alignment:

• Baseline: 10% on most imports (including coffee from Colombia, Ethiopia, Indonesia).
• Brazil-Specific: 50% on all goods (effective August 6, 2025), explicitly tied to Brazil's BRICS ties, Belt and Road deals with China, and trade surplus with the US. No exemptions for coffee, despite lobbying from the National Coffee Association.
• Broader Threats: Up to 100-150% on BRICS exports if de-dollarization advances; Indonesia (32%), South Africa (30%), and Ethiopia (potentially 20%+) also hit.

These tariffs add ~$43 in economic value per $1 of imported coffee (via US jobs in roasting/brewing), but they've halved Brazil-US coffee flows since August, forcing rerouting. US importers pay tariffs upfront (e.g., $75,000+ per container), passing costs to roasters and consumers.

How This Drives "C" Market Price Changes

Tariffs disrupt supply chains, inflating "C" futures:

1. Supply Squeeze: Brazil's exports to the US dropped 28% in July 2025; ICE-monitored Arabica stocks hit a 17.5-month low (601,717 bags) by September 24, 2025. US roasters are shifting to Ethiopia/Colombia (up 15-20% sourcing), but global inventories are tight amid Brazil's dry September weather and frosts.
2. Diversion to Non-US Markets: ~8 million redirected Brazilian bags now flow to China (up 20% YoY) and the EU (tariff-free), tightening Arabica availability and bidding up futures. Intra-BRICS deals (e.g., yuan-settled Brazil-China coffee pacts) accelerate this.
3. Hedging and Speculation: Late US hedging post-tariffs has forced producers to unwind short positions, adding upward pressure. Managed money funds are bullish, targeting under-covered roasters.
4. De-Dollarization Ripple: Reduced dollar use in BRICS trade (~33% drop) limits US leverage, prolonging volatility. Trump's threats exacerbate uncertainty, with prices up 23% YTD and 28% in August alone.

Short-term (Q4 2025): Prices could test all-time highs (>400 USd/Lbs) if Brazil's harvest dips 5-10% from weather. Long-term: Fragmented trade may add 10-15% to US retail prices by 2026, though exemptions via deals (e.g., Ethiopia's potential) could ease this.

In summary, BRICS' supply dominance + US tariffs (politically motivated by bloc rivalry) = higher "C" prices via scarcity and rerouting. US consumers face ~21% hikes, while BRICS exporters pivot eastward, underscoring a multipolar trade shift.

How does hedge fund trading on the "C" market impact coffee pricing along with all the factors mentioned above?

Hedge Fund Trading and the Coffee "C" Market

Hedge funds significantly influence the Coffee "C" futures market (Arabica coffee traded on the ICE), which serves as the global benchmark for green Arabica bean prices, quoted in US cents per pound (USd/Lbs). As of September 25, 2025, the December 2025 "C" futures contract closed at 372.93 USd/Lbs, up 36.40% year-over-year, driven by supply constraints, US-BRICS trade tensions, and speculative activity. Hedge funds amplify price volatility through leveraged positions, trend-following algorithms, and liquidity provision, interacting with the BRICS-related factors (tariffs, de-dollarization, supply shifts) outlined earlier. Below, I integrate hedge fund trading’s impact with those factors to explain coffee price dynamics.

How Hedge Funds Impact "C" Market Prices

Hedge funds engage in speculative and hedging strategies on the ICE, affecting both short-term price swings and long-term trends:

Speculative Positioning:

• Hedge funds, classified as "managed money" in CFTC Commitment of Traders (COT) reports, hold significant net long positions in "C" futures. As of September 23, 2025, funds increased bullish bets by 4,523 contracts (to 50,000+ net long), reflecting optimism on supply shortages. This amplifies upward price pressure, adding ~5-10% to futures prices during bullish cycles.
• Interaction with BRICS Factors: Brazil’s reduced exports to the US (down 28% in July 2025 due to 50% tariffs) and tight ICE stocks (601,717 bags, a 17.5-month low) signal scarcity. Funds exploit this, buying futures to capitalize on expected price spikes, pushing "C" prices toward 400 USd/Lbs. For example, August 2025’s 28% rally was partly fund-driven, per market analysis.

Algorithmic Trading and Volatility:

• High-frequency and trend-following algorithms used by funds amplify short-term swings. Stop-loss triggers and momentum trades exacerbate price moves when BRICS-related news (e.g., Trump’s 100-150% tariff threats on BRICS nations) hits markets. Volatility in September 2025 spiked 15% above historical averages, per ICE data.
• BRICS Link: Tariff-induced supply disruptions (e.g., Brazil redirecting ~8 million bags to China/EU) create price gaps that algorithms exploit. Funds’ rapid buying/selling in low-liquidity periods (e.g., post-tariff announcements) can add 2-5 USd/Lbs daily swings, impacting roasters’ hedging costs.

Liquidity and Price Discovery:

• Funds provide liquidity, enabling smoother price discovery, but their large positions can distort signals. In 2025, hedge funds’ record open interest (~200,000 contracts) has deepened the market but also led to overcrowding in long positions, risking sharp corrections if fundamentals shift (e.g., Brazil’s harvest exceeds forecasts).
• BRICS Context: De-dollarization (BRICS Pay reducing dollar use to ~33% in intra-bloc trade) creates uncertainty in dollar-denominated "C" contracts. Funds hedge this by increasing futures exposure, indirectly raising prices as they cover risks from currency shifts (e.g., yuan-based Brazil-China deals).

Short Covering and Squeezes:

• When funds misjudge supply (e.g., underestimating Brazil’s weather issues or Ethiopia’s export limits), they’re forced to cover short positions, triggering rapid price jumps. In August 2025, short covering added ~10 USd/Lbs in a week, per Reuters.
• BRICS Impact: US tariffs (10% baseline, 50% on Brazil) and BRICS’ eastward trade pivot (e.g., Brazil-China flows up 20% YoY) reduce US-bound supply, catching funds off-guard. This fuels short squeezes, amplifying price surges.

Combined Impact with BRICS and US Trade Factors

The interplay of hedge fund activity with BRICS-related factors and US trade policies creates a feedback loop driving "C" prices:

Supply Constraints (BRICS-Driven):

• Brazil’s drought and frosts (5-10% potential 2025 harvest drop) and Ethiopia’s export limits tighten global Arabica supply (~50% from BRICS). ICE stocks at historic lows signal scarcity, prompting funds to go net long, pushing futures up ~36% YTD.
• Hedge funds amplify this by betting on further disruptions, especially as Brazil reroutes exports to avoid US tariffs, reducing US supply by ~2 million bags annually.

US Tariffs and Trade Tensions:

• Trump’s tariffs (50% on Brazil, 10% on Ethiopia/Indonesia) add ~$75,000/container in costs, passed to US roasters and consumers (retail prices up 20.9% YoY). Funds capitalize on this, buying futures to profit from tariff-driven scarcity, contributing ~10-15% to price hikes since July 2025.
• Threats of 100-150% tariffs on BRICS nations for de-dollarization (e.g., Brazil’s Belt and Road deals) spike volatility, encouraging funds’ speculative trades, adding 5-7% to monthly price variance.

De-Dollarization (BRICS Push):

• BRICS’ shift to local currencies (e.g., yuan for Brazil-China coffee deals) reduces dollar demand, creating uncertainty in "C" futures (dollar-denominated). Funds hedge this risk, increasing long positions, which lifts prices by ~3-5% as they absorb currency volatility.
• If BRICS Pay expands, diverting more coffee from dollar markets, funds may drive futures higher to offset reduced US market access.

Consumer Price Impact:

• Hedge fund-driven futures spikes directly raise green bean costs for roasters, who pass on ~80% of increases to US consumers. Retail coffee prices ($8.41/lb in July 2025) reflect this, with funds’ speculative activity contributing ~10% of the 21% YoY retail surge, per BLS data.

Outlook

Hedge funds magnify the upward pressure on "C" prices already driven by BRICS supply dynamics and US tariffs. Their speculative bets and algorithmic trading could push futures past 400 USd/Lbs by Q4 2025 if Brazil’s harvest disappoints or tariffs escalate. However, a risk of sharp corrections looms if funds unwind overcrowded longs (e.g., if global supply stabilizes). Long-term, BRICS’ trade pivot and de-dollarization may sustain volatility, with funds adding 5-10% to annual price fluctuations. US consumers face persistent retail price hikes (~15-20% by 2026), driven by this interplay, unless bilateral deals (e.g., with Ethiopia) ease tariff impacts.

In summary, hedge funds act as a force multiplier, intensifying BRICS-US trade frictions’ effect on "C" prices through speculative and hedging strategies, contributing ~10-15% to recent spikes alongside supply and policy drivers.