Financialized Arabica coffee: Distributional asymmetries and the burden on smallholder farmers

This quantitative study examines the impact of the growing financialization of the Arabica coffee (Coffea arabica) futures market, as reflected in the widening gap between futures and spot prices, on smallholder producers' incomes and the generation of distributional asymmetries along the value chain. To this end, statistical techniques are employed, and two indicators adapted from existing approaches are operationalized: The Net Positioning Index (NPI), which captures net speculative bias, and the Positional Extremes Ratio (PER), which measures the persistence of speculative episodes. Both indicators are empirically validated using Threshold Regression and Threshold Autoregressive (TAR) models, confirming their ability to anticipate extreme speculative conditions and to capture their effects on the futures-spot price gap. The analysis covers the period 2014-2025 and relies on weekly position data from the Commodity Futures Trading Commission (CFTC), daily futures prices from the Intercontinental Exchange (ICE), and domestic spot prices. The results indicate that speculation has intensified the disconnect between international prices and producers’ realized revenues, with the gap reaching USD 1.21 per pound in 2025 and failing to transmit to the domestic market. Moreover, more than 70% of the weeks in 2024 exhibit extreme speculative episodes (PER >0.66), pointing to persistent speculative volatility. Overall, the findings provide empirical evidence of the regressive effects of financialization and offer analytical tools to inform mitigation policies and early-warning mechanisms in agricultural markets.