It's always a buyer's market until, you know, four out of the last 30 years, suddenly it's a seller's market and they start to remember what buyers did to them five years ago. And so now that it's kind of a revenge type of thing and they hold out their selling. And eventually what happens is we start to something, maybe some sort of news event or something changes that we're not aware of today happens tomorrow or next week or whatever it is. And it breaks prices down a little bit and then suddenly those producers are kind of panic selling and then it starts to feed on each other because the whole world's long coffee and everybody needs to liquidate and that's just how it works.
So to make a long story short, I believe that we are probably going to witness a 50 to 65% correction just like we have in the last cycles. If we do 60 to 65ish, we're looking at the high $1. There's a trend line that comes in. It's like a multi-year trend line that comes in right around $2.
I think we see at least $2 wouldn't be shocked to see the high $1. Not gonna happen in two weeks, but I think by, say two years from now, I think we'll easily be $2 or lower. If the work we're doing here at Map of Forward has helped you navigate the challenges of the coffee crisis and you've been wondering how you can support us. Here are a few ways.
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Thank you for being a part of our community and you can find all the relevant links in the show notes. Welcome to the Delhi Coffee Pro by Map of Forward Friends. I'm your host Lee Safar and this is unfortunately the final episode of what I think has been our best series yet, Carly. This has been a truly delightful conversation, one because I've understood everything that we've talked about and two because I think this is gonna be really, really valuable for farmers out there that have just been really angry about the volatility that's in the sea market and I really hope that this gives them at least some hope about how they can use these tools moving forward into 2026 so that they can be more empowered to have some more say in the stability of their business or at least the relationships that farmers and roasters can build together that can bring some more stability to that.
So I really appreciate you going through the effort on your Saturday morning to help us understand this stuff. So we are talking about the coffee market in 2025 and 2026 and this is the episode that we focus on 2026. And I think I'm gonna start this conversation by asking you, do you think that 2026 is going to be worse than 2025 or do you think that we've seen the worst of it in 2025? I think it's a lot of questions.
But look at your faces like, should we bet on that? For my own sanity, I hope that 2026 is far less eventful and I actually think it will be. Really? It's actually really great.
Yeah, and for many reasons, but one partly because in the first segment we were talking about money supply explosion and all the chaos that it's driven in with speculation and commodities and stocks. And I actually think we're at the very tail end of that. Really, five years is probably enough time to run all of that chaos through the system. So I think we're gonna get through that.
Yeah, believe it or not, I think, I mean, I could be wrong, but I think we're whether it's markets, society runs in cycles and this has been one heck of a grand finale and I think we probably it's a much more reasonable environment in 2026. Maybe I'm just being optimistic with that. I do truly believe that and I'm truly hoping for that. I hope that you are so right on that because I don't know that that's where it's gonna go.
And every day I think I hope I'm wrong because I think that there's so much inflation in the market and what I mean by that is we have a saturated market with regards to cafes and roasteries. We have a lot of uncertainty with regards to the supply of coffee next year. We don't know what's gonna happen. We're either gonna have a really, really amazing year or we're gonna have a really, really terrible year.
And it doesn't feel like there's gonna be anything in the middle of that. What's happened in Vietnam is one indicator of that. And so people are just worried that we're gonna have more volatility and we don't know what's gonna happen to the consumer. Is the consumer still gonna be able to pay $13, $14 for a fucking cloud marcher or a cloud iced latte or what's gonna happen, I don't know.
Okay, well, honestly, I don't think our answers are that far apart. I think we stand different perspectives. Cause I'm based on where I'm sitting at the table. I'm speaking specifically about market volatility.
But like as a commodity person, when I think of market volatility, I'm usually talking about upside volatility because markets get more explosive on the way up. And they can sell off, obviously there's a saying, we take the stairs out of the elevator down and that is true, even in commodities. But we generally start to get into interval, lower type of scenario. And I think I am probably an opposite opinion of you in regards to the direction of coffee prices.
When I say things are going to normalize, in my mind as a commodity industry professional, normalized commodity prices is generally lower. I know that's good for some people, bad for other people. But if you look at a 30-year chart of coffee or any other commodity, these types of rallies and explosive volatility are the exception, not the rule. Coffee's had, this is the fourth rally in 20 years, like legitimate bull market, 20 years.
And it's been the most impressive in the most volatile. But I think that really comes down to money supply and all these things we've already talked about. There's other issues going on, but I think that exacerbated it. And I think that's, I think it works its way out.
Now, you mentioned coffee shops and the consumer, now that I'm not optimistic in the economy. The economy, right, right. I believe, like I mentioned earlier, I think the wealth effect has kind of been allowing us to run on these fumes. And if Bitcoin is telling us something and Bitcoin, I think it's telling us something, we're going to start to see a lot of these inflated assets come down in the U.S.
that means home prices in addition to stocks and Bitcoin and all these other things that have just gotten really out of over-inflated. If those come down, consumers are going to step out. I mean, honestly, I think it kind of implodes on itself. So I'm prepared for something maybe less chaotic, but more painful if you're holding assets or if you own a business.
So if you're wealthy on paper, that could shift significantly. Yes, if you don't sell it. And I don't sell it, unfortunately. I think people have been trained to not sell their assets.
I think they've been trained to buy dips and just keep rolling the dice, and it's worked for them, and I'm happy for them. But it's not how much money you make, it's how much money you keep. So me personally, and I've been saying this for a year, and honestly, everything, nothing really horrible has happened. I mean, everyone's economy's kind of chugging along, but I don't trust it.
I'm a very, in a risk-averse mindset where I'm preparing for some sort of economic downfalls, just because I think we're way overdue. We've gotten into the cycle where the government tries to fix the economy all the time, and it over-doesn't, and it's been successful so far, but we can't- We've got to pay the bill at some point. Exactly, yes, thank you. Help me understand something with regards to the market that people are wondering, going back to the futures market in 2026.
So the big concern that people have is that, as you say, over the last 30 years, there's only been four main rallies, and that makes people angry because when the C-market started, it started at about $3, and the majority of the time since then, it's been well under $2, and adjusted for inflation, coffee should be at about $14. Over there. It's interesting that. Go ahead.
Yes, because I will say, I hear this a lot, and I totally, I understand and respect, and especially from a producer's point of view, I totally appreciate it, because their costs, inputs are going up, and they need a lot of need to follow for it to make sense on people. But the reality is, historically, inflation has really been inconsequential to commodity pricing, and here's why. There's really two main reasons why. For starters, technology and scientific advancement is deflationary.
So every year that goes by, our farmers, our ranchers, our energy companies, they get better at producing commodities, they get more efficient at producing commodities, so it pulls the price down. So commodities don't go up with inflation over time. What's really, well, let me go back to the second reason that commodities don't gradually inflate over time like other assets do, is because people have choices. If coffee gets expensive, they might just match that chocolate.
Yeah, I wouldn't. Yeah. But this is how people work. This is how it works.
And as much as we want to think, whatever it is that we're producing, is superior or nobody can ever look without it, it's really, it's just not how it works. When prices change, people's behavior changes, so then the market has to accommodate. So for those two reasons, it just doesn't work out the way you would think it would. Like, inflation is kind of just, it's not connected to commodity pricing.
So the ironic thing is, which is wildly ironic, when inflation starts to go up, the first thing fund managers or investors, or people with means do, is put money into commodities, because they think it's gonna hedge their inflation. So that's the worst, honestly, that's the worst part about it. So when you start seeing like in 2022, when we started getting inflation, gaining speed, all this money flowed into assets like wheat, corn, soybeans, just simply because people were trying to hedge their inflation and it actually caused inflation. So it's really super dysfunctional.
Unfortunately, it's the best system, but I think it's also a very dysfunctional system. You know, you gave me a thought that I've not had before. And that is that you're saying that technology has gotten better on farms. You know, the one thing that we've not talked about ever in our conversations, that we should have been talking about, is that there's such a difference between big, huge farms and smallholder farmers, right?
Like, when you're looking at wheat, you're looking at corn, these are usually huge, big, monocrupt farms. And in coffee, there's 12.5 million coffee farmers. Something like 90% of those are smallholder farmers. And they have like three hectares of land.
Yeah, it's definitely indifferent. It's a whole different landscape, right? So you have, and typically what these farmers do is they pick their cherries and they send them to a co-op, which is owned by one way or the other, owned by one of the big trading houses. That is using the futures market to hedge against a lot of stuff.
So they own the washing stations, they own the companies that are selling giving loans for fertilizers and things like that. It's a horrible system that is built to entrap the coffee farmer. And they're stuck in this loop where they can't do any of these stuff. They just don't have the extra cashflow.
They're worried about how to feed their family. But I don't know why we've never talked about that. That's really interesting, no? It for sure is.
I don't know how it works outside. All I know is what I know. So in the US, we actually have, there's most of our farms here are also family farms, but they have technology and science available to them because honestly, it's a really big industry. Like John Deere is a tractor company.
They have very aggressive salespeople that go and sell that each farm and then there's like seating companies that go and sell like bioengineer. Seeds. So for us, technology is always at the forefront and it's always putting pressure on prices. So I guess I never thought about the difference in coffee.
So again, I'm wearing something new. And because coffee's not so mechanized, right? Like in Brazil, because it's on flat land, a lot of the farms are mechanized. So they're not so heavily dependent on labor, but we've got a labor crisis in coffee farming at the moment in every other growing region, even in Brazil, but they have machines that can help them with that stuff.
But in most places, because coffee's grown on the side of mountains at elevation, they need people. And during the Biden, up until the Trump administration, and particularly during the Biden administration, a lot of people left their farms and migrated to the southern border of the United States because it was like a free-for-all. Everyone can come in. Don't worry about me.
But the interesting geopolitical blowback on that is that pickers were no longer available to pick coffee. And now we have a shortage. That is one of the main reasons. It is the number one thing that is a problem for smallholder coffee farmers right now, is that cherries are staying on the trees because they can't afford the pickers.
Which is super interesting from the perspective when you get reports that are saying, there's no coffee, there's no coffee, there's no coffee. On my YouTube channel, the number one people that comment are speculators asking if there is going to be, how sure am I about the lack of availability of coffee? Well, I speak to coffee producers and I know that there's no coffee. So it's just a very interesting cycle.
It is, it always will be, that's how commodities run. I think we talked about this last time. I mean, I'm not gonna pretend to know the very, as deeply as you do the fundamentals of coffee, but there is always something lurking around the corner to shake things up. Because when money's a motivator, money motivates technology, you have innovation, something's gonna come along and somebody's gonna wanna make that money.
$3, $4 coffee's pretty attractive and something will happen. Going back to your further point where you're mentioning farmers sell to co-ops. That's much like the system here in the US and we've already mentioned this, but I'll just repeat it one more time. It's you're leaving money on the table because you're setting the price of co-op pays you.
It's simple, it's easy to drive away. You don't bet you drive away and you're trucking and it's over. But they're telling you what the price is, you're not telling them what the price is. So I can't, I'm not gonna pretend to understand the coffee business but I do own my own small business and so what I've learned, I've been in this business 20 years and I've kept the same commission rates the entire 20 years.
I've never lowered my commission rates when everyone else in the industry has done exactly that. They've lowered, they've gone to bottom basement commission and they've basically streamlined their service to a service that, here's your open account, here's your trading platform. Don't call us, don't ever call us again. And so I have different, and I'm not saying it's easy for a coffee farmer to do this but as a small business owner, if you differentiate your product and you set yourself, don't have a standardized product, have something that's bigger or better, you can hopefully set your prices as opposed to be a slave to the C market or whatever it is that's dictating prices in your industry.
So. And you raise the outside of the box and putting a little more effort in, I think you go a long way. And you raise a really great point there in the sense that a lot of people have fear around going outside of the system that they know. They have been told that this is the only way that it can be.
They have been told that they have to do things this way. Something that excites me about the next generation of coffee farmers that are saying, yes, I wanna take over. They are listening to podcasts. They are going on YouTube.
They are using the technology that's available to them to start to learn alternative methods to do things. And they are taking not greater risks or lesser risks. They're taking different risks. They're trying to do things different.
They're getting on planes. They're going and meeting new people so that they can make relationships so that they don't have to worry about sending the coffee to a meal. So they're. And it's a win-win.
And it's 100%. Yeah. And so going back to the thing that we were saying about how there's been adjusted for inflation, people are pretty angry that the price today is still sort of still hovering around where it started. Was it 50 years ago that the exchange started?
Neither of us know that, but it was decades ago, right? Where it was born. Decades ago. And so what people are wondering is that is there a chance that this market will go back down to $2?
I keep getting asked that by everybody. Is this market going back to $2? Well, in my opinion, this can be very unpopular opinion. I believe it is.
For one, there's many reasons I think this, but starting with the currency changes, I think the real probably starts to roll over. And if that's the case, the US dollar strengthens, if that's the case, coffee's going to have a really, really hard time sustaining these prices. The natural cycle of commodities, high prices, high prices are working in the behind the scenes. Somebody's figuring out how to make more coffee with less.
That's how it works. But if you look at specifically, if you look at coffee over the last three decades in the four rallies, or the three rallies that have occurred prior to this one, they all have kind of had, markets don't always repeat themselves, but they generally rhyme. And they've all had kind of the same general pattern. We've generally had kind of one big initial rally followed by a 20, 30% pullback, and then it makes another run at the high, and then it just completely rolls over.
Each of those corrections, if you want to call, or in commodities, it's really not a correction. It's you go from bull market to bear market, and there's really nothing in between. Each of those times have seen correction, what to say, bear markets of 50% to 65%. And I think at some point, we're going to see the same thing here in this cycle.
I know there's lots of reasons for coffee to be $4, but if you think about it, everybody in the world knows of these reasons. Everybody has the internet, everybody has X, everyone has Bloomberg, everyone's watching, map it forward. Everybody knows why coffee should be up here. But what we don't know is what's going to take coffee down, and eventually, that's just how this kind of stuff works.
And another way to look at it is, if everybody knows, and the bullish fundamentals, probably everybody has reacted to that, right? Everyone that wants to be long copies bought, producers and end users have reacted accordingly. And what often happens, producers tend to get a little bit complacent up here. People haven't checked on their shoulder in commodities as they rightfully should, because this is a very, very tough business.
When things are going their way, they feel like they're finally getting paid back for the misery that they suffered before. And then five years later, as the exact opposite, it just goes back and forth. It's a really terrible game, but this is unfortunately how it works. And so when prices get high, like those producers are kind of hesitant to sell, because they're holding out for higher prices, and they know it's a seller's market.
Commodities are almost always a buyer's market. It's always a buyer's market until, four out of the last 30 years, suddenly it's a seller's market, and they start to remember what buyers did to them five years ago. And so now that it's kind of a revenge type of thing, and they hold out there selling. And eventually, what happens is we start to something, maybe some sort of news event or something changes that we're not aware of today, happens tomorrow or next week or whatever it is, and it breaks prices down a little bit, and then suddenly those producers are kind of panic selling, and then it starts to feed on each other, because the whole world's long coffee, and everybody needs to liquidate, and that's just how it works.
So to make a long story short, I believe that we are probably gonna witness a 50 to 65% correction, just like we have in the last cycles. If we do 60 to 65ish, we're looking at the high $1. There's a trend line that comes in, it's like a multi-year trend line that comes in right around $2. I think we see at least $2 wouldn't be shocked to see the high $1.
It's not gonna happen in two weeks, but I think by, I'd say two years from now, I think it will easily be $2 or lower. You know, that's very interesting that you say that, because certified stocks for coffee are the lowest they've ever been, around the lowest they've ever been, and people are very, very nervous about that. And that's why they're saying that this harvest in Brazil is something that they're really watching very closely, because they need this to be a record crop, and everyone keeps talking about comparing it to 2020, which was a record crop, and they're saying that if Brazil has a record crop this year, then that's gonna be great, because we will have replenished the certified stocks. Now, in that situation, that's where I can see that the prices would go back to what you're saying, twos, high ones, right?
What if that doesn't happen? So I totally acknowledge the tightness in stocks at the ice exchange, I've been reading about that as well. I do think that the reason I think we might see coffee rally here in the next handful of weeks, maybe even one or two, is partly because I think that now that the tariffs have been removed, I think there's gonna be an effort to rebuild, and not just at the exchange, but literally everywhere. 50% tariff was pretty dramatic, so now that it's zero there, people are gonna be building up their stocks, and that's probably gonna push prices up a little bit, in addition to this seasonally bullish time of year for coffee, because of questions about Brazil and things like that.
So I'm not saying we could just start selling off immediately. In fact, I would love to see four dollars of March coffee or a little above, because we're hoping we can get some of our hedgers on like hunched, or indoor speculators playing the downside. The low stocks is a trailing indicator. So I'm not saying anybody's wrong.
I'm not saying that it's not the reality, because it is, but again, it's kind of like, everybody already knows the stocks are low, and they're probably mostly priced in. So I remember, I'm gonna bring back the same old examples, because they're just so obvious. Like if you look at natural gas in 2022, stocks, like basically the supply of natural gas was the lowest it had been. I can't off top of my head, I think it was like 10 years or something.
So like we were really, really, really tight on supplies, and that's exactly where the market peaked out. So when you see the supply get to an extreme, whether it's over-supply or under-supply, it doesn't necessarily mean that that market trend is gonna continue. In fact, a lot of times it's the opposite. You actually see the market kind of reverse ago, the other way eventually.
And I don't know why it is, but commodities always work it out. It's something always gets worked out. So we're always scared. Again, I'm gonna bring back the old crude oil example.
In 2008, if you just Google search peak oil, you're gonna pull up all these articles in 2008, the entire world thought we were out of crude oil. Nobody thought that it was not a lift. Out, like, well, almost out. Yes, like everybody was convinced where our crude oil supply is globally, are basically dwindling and we're using too much, and we're gonna be out in handful of years.
Oil was a 150. Everyone was thinking 200 to 50 because how could it possibly not go up when we're on that oil? And somebody had been fracking, and then now we're in a post-fracking world. Suddenly we have plenty of oil, nobody's worried about it.
So these types of things happen. Somebody always saves the day when things get really tight because prices are high. And so I don't know what it's gonna do and I don't know what the catalyst and coffee. And it might just be taking the tariffs off, maybe just the change in mindset.
I'm not saying it's gonna happen right away because as we mentioned, nobody trusts it yet, but maybe just the change in mentality will be enough for it to feed on itself on the downside once we get a little more certainty into what's going on in Brazil. Sorry, in that situation. Maybe I'm wrong. If there's any producers that are holding back coffee because the tariffs are so high, they might release a little bit more into the market, which might help things.
Yes, and we also have to keep in mind that everybody, everyone's human and everyone's emotional. So as strong as people are when everything's going their way, they become just very, very weak. When it starts going the other way. And this is not to criticize anybody.
This is literally we all experience it. I do, everybody does it. So if you do start to see coffee's breaking down people, well, people start to panic. And I wish I had the COT report available to me, which is the commandment of traders report telling us where address and speculators are positioned.
The US government's been shut down for a while, so we haven't gotten that data. And I really miss it. I really do, but I suspect, like very similar to the other rallies in coffee, we get this massive surge in price and speculators and speculators go wildly long, commercials go wildly short. And then on the second retest, I mentioned earlier, they tend to pull back and then we retest on the second retest, speculators and hedgers have smaller positions.
And I don't have the data yet, but I believe it's probably, that's probably the case, which means even the prices have made a new high here on this most recent rally speculators probably aren't participating as much as they were before. And I think that shows a lack of moment. So it shows a tired market. Final question before our final question.
If this I'm winding that we're seeing in like Bitcoin and in the stock market and a lot of basically speculators who are speculating in other markets, if they start to get out of the coffee market, first of all, do we expect that that will happen? Do we expect that that people will unwind out of coffee? Yes. So most, a lot of speculators have already unwound that I got earlier this year.
If you look at the COT report again, we do have data for going back in that timeframe and speculators unwound a pretty big position. They're still net long, according to the data I have available, which I mean, kind of guessing. So they're still net long and they will continue to liquidate in my opinion as we go forward. Again, maybe not immediately, but in the next couple of months.
Should they liquidate all at the same time? Really, when people are buying or selling futures, this is what gets confusing for people. But the way markets work is for every buyer, there's a seller. So it's not like there's more people buying than selling or what it is is motivation.
So if people are more motivated to sell, if they're scared of their panic, then it goes down. It goes down. If people are more motivated to buy, it goes up. So it's really about sentiment in market positioning more than anything.
Okay. So I think it's safe to say that 2026 is at least going to be entertaining. Oh, it won't be boring. It won't be boring.
I'm hoping it's less entertaining than 2026. This was too much. Like when we spoke at the big in April, I was like, I can't believe that there's been like already so much has happened. Surely it can't get worse than this.
And like, sits then, I feel like I've lived three lifetime color. I hear you. I've aged. I'm starting my years getting quite a bit.
You look amazing for your age. You look amazing in general. I want to keep it up now. So again, thank you for being so generous with your time.
And for always like being here for the coffee industry, you've never let us down. You're a real champion for our industry and people love when you come on the podcast. I can't believe we've been doing this for like seven years. It's wild, hey.
It's wild. We must be getting old. We're well there. We're well there.
Can you tell people what your books are, where they can find them, where they can connect with you, all that good stuff? Okay. So I've written quite a few books, but most of them you can just completely ignore. The ones you need to focus on are a Trader's First book on commodities.
That's ground zero. That's going to tell you what are future contracts, what are options. I think most people should start there. And then higher probability commodity trading is the second title that you should look out for.
That's going to kind of give you an idea of market seasonality, market analysis. It does have a section on coffee, but it also talks about other commodities. And the last one is trading commodity options with creativity. If you really want to truly give yourself a good chance at hedging properly, this is something that you really want to look into because as I mentioned before, you can hedge your futures by, or I'm sorry, hedge your production by selling futures and the futures markets, but it's very expensive and stressful.
If you do it with options, you can take some of the stress out and give yourself some ability to sleep at night while you're protecting yourself. And you can find us at DecarlyTrading.com. It's D-E-C-A-R-L-E-Y, trading.com. Lastly, I have a sub-stack that we just opened up a few months ago.
So if you don't have no interest in hedging or trading commodities, you can check us out on sub-second. You can get our analysis. That's DecarlyTrading.sub-stack.com. Yeah, congratulations on the sub-stack.
And we will have links to everything in the show notes. Honestly, guys, if you're even just thinking about it, as I said earlier in the series, there's nobody I would trust more than Kali to take care of me if I was getting into this side of things. So definitely give her a call. And Kali, as always, we ask the CE, the last conversation, the last question in this conversation, when the future version of you comes back and sees this, what do you hope for her?
Well, I hope I can look back at this conversation and feel like I've offered some genuine insight as opposed to like, our business is flooded with snake oil salesman and I never want to come across. What are you talking about? I mean, ultimately I'm a broker and I've run a business, but I prefer to teach people and make sure they're educated as an educated client as a better client. And I want to say one last thing.
Like I've known many people who do what you do. I have known many people in that part of our industry. I've never met somebody who prioritize small business, the way that you do and who cared about people's success in small business, the way that you do. That even when we would go for a coffee or when I had a lick of specialty coffee, I would delight in getting messages from you saying, I'm in some place and where were you once?
I think I'm Malibu. I think you're Malibu. Yeah, and my point is that wherever she can support small businesses, she does. And that is so rare amongst the people that do what you do.
And I'm proud to call you my friend, but I'm really proud and really grateful actually that people get to hear your voice on my podcast, guiding them as they go through. What is the very kind of scary journey? People in my industry just want to grow coffee, roast coffee, sell coffee. Right.
Yeah. And who can blame them? Who wants to do with all this stuff? I mean, and I appreciate that.
We definitely have a mutual respect. I love what we're doing with your podcast. And I'm a small business owner myself. I know how hard it is as do you.
So it makes me feel good to support small business. And it's genuine. That's why I wanted to mention it is because it's like, there's a lot of snake oil businessmen out there, business people out there, and you're not one of them. What you do is to favor and sign off our series for us with the piece of memory.
Piece of love on the piece. Love on the peanut butter. Thank you, Kyle. This episode is part of a five part series produced by Mapper Forward.
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