Coffee.
ICE Arabica futures — the benchmark for Ethiopian coffee exports
$
ICE Arabica C (cents per pound)
52-Week Range
195.20 — 425.10
524 trading days
Ann. Volatility
34.8%
MLE λ=0.992 (N=523)
VaR (95%)
3.94%
Cornish-Fisher
Regime
Mixed
P(turb.) = 40%
Price History.
Daily closing prices with Bollinger Band overlay
Regime Detection.
Hamilton (1989) two-state Markov switching model
Calm State
σ = 29.8% ann.
Avg. duration: 2 days
Turbulent State
σ = 40.4% ann.
Avg. duration: 2 days
Regime Timeline
Transition Probabilities
P(calm → calm) = 50.0%
P(calm → turb.) = 50.0%
P(turb. → turb.) = 50.0%
P(turb. → calm) = 50.0%
Model Diagnostics
Converged: Yes
Observations: 523
Log-likelihood: 1227.3
Vol ratio (turb/calm): 1.4x
Returns Distribution.
Log return histogram with normal overlay
Mean
0.0349%
Std Dev
2.3286%
Skewness
-0.229
Excess Kurtosis
0.195
Jarque-Bera
5.40
JB p-value
0.0672
Normal?
Yes
Observations
523
Volatility.
EWMA volatility (λ = 0.992) — annualized
Seasonality.
Monthly return patterns across available history
| Year | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | — | — | — | -32.2% | +2.6% | +2.0% | +1.1% | +6.5% | +10.7% | — | +29.3% | +0.5% |
| 2025 | +39.8% | +7.0% | +1.8% | +5.5% | -14.5% | -12.4% | -1.4% | +30.5% | -2.9% | +3.8% | -2.8% | -8.5% |
| 2026 | -11.4% | -15.5% | +6.3% | -4.2% | -4.0% | — | — | — | — | — | — | — |
Average Monthly Return
Seasonal Context
Ethiopian Arabica harvest runs October through December, with peak exports in Q1. Brazilian frost risk peaks June–August. The ICO composite price typically strengthens heading into Northern Hemisphere winter as roasters build inventory.
Risk Metrics.
Value at Risk, Expected Shortfall, and drawdown analysis
Interpretation: On 95% of trading days, the loss is expected to be smaller than 3.94%. On the worst 5% of days, the average loss (CVaR) is estimated at 4.48%. The 99% VaR captures more extreme tail events at 5.83%.
Estimated from 523 daily returns. Tail risk estimates improve with longer history.
Maximum Drawdown: 35.91%
Related Markets.
Return correlations with economically linked assets
KC vs ZW: 163 overlapping return observations
KC vs ZS: 163 overlapping return observations
Note: Return correlations are unstable over time and do not imply causation. These pairs are shown because they share economic drivers (e.g., agricultural supply chains, energy complex), not because correlation alone is meaningful. Short-sample correlations (N < 250) should be treated as rough estimates.
Trend Analysis.
Hurst exponent and Bollinger Band bandwidth
Hurst Exponent
Estimated via R/S analysis from 523 return observations
Bollinger Bandwidth
Bandwidth is contracting (squeeze) — volatility is compressed. Whether this resolves up or down is not predictable from bandwidth alone.
About Coffee.
Fundamentals, catalysts, and Ethiopian trade relevance
Ethiopian Trade Relevance
Ethiopia is Africa's largest coffee producer and the birthplace of Arabica. Coffee accounts for ~30% of Ethiopia's export revenue. The ICE KC contract directly impacts farmgate prices, export earnings, and Muda Coffee's core commodity operations.
Supply & Demand Fundamentals
Global supply/demand balance driven by Brazil (40% of world production), Vietnam (robusta), Colombia, and Ethiopia. Climate sensitivity is extreme — a single frost event in Minas Gerais can spike prices 20%+ in days. Warehouse stocks (ICE certified) are the key inventory signal.
Key Reports & Catalysts
Quote Convention
ICE Arabica C (cents per pound)
Unit
¢/lb
Trading Days/Year
252