Soft commodities explained: trading coffee, cocoa and sugar CFDs

Soft commodities, or softs, are agricultural products that are grown rather than mined or extracted, and the best-known trading markets are coffee, cocoa and sugar. Their benchmark futures trade on ICE exchanges in New York and London, and many CFD providers offer contracts based on those futures. Softs can be very volatile because production is concentrated in a few countries and depends on weather and crop health, as the record-breaking rally in cocoa during 2024 showed.

This guide covers the three main softs one by one, what moves their prices, how they are quoted, and the practical points to check before trading them as CFDs. Cotton and orange juice are also usually classed as softs but are rarely offered as CFDs, so they get only a passing mention. For the general mechanics of futures and rolls, see how commodity futures work.

What makes softs different

Softs share a few features that set them apart from oil, metals or indices:

• Concentrated production. A large share of each crop comes from a small number of countries, often in tropical regions. A drought in one of them can affect world supply.
• Biology. Crops take time to grow. Coffee and cocoa are tree crops that take years to reach full production, so supply cannot respond quickly when prices rise.
• Weather and disease. Frost, drought, excessive rain and plant diseases can damage crops in ways that are hard to forecast.
• Smaller, less liquid markets. Compared with crude oil or major stock indices, soft futures trade far less volume. Smaller markets can move further on the same flow of orders.
• Shorter trading hours. The exchange sessions for softs are much shorter than for energy or indices, so overnight gaps are common.

The result is a group of markets that can stay quiet for long periods and then move by large percentages in weeks.

Coffee

Arabica and robusta

There are two commercially important coffee species:

• Arabica is generally used for higher-quality coffee. Its benchmark is the ICE coffee futures contract in New York, quoted in US cents per pound. One futures contract is 37,500 pounds.
• Robusta is hardier, has a stronger taste and is widely used in instant coffee and blends. Its benchmark trades on ICE Futures Europe in London, quoted in US dollars per tonne.

Brazil is the largest coffee producer and the dominant arabica supplier; Vietnam is the leading robusta producer. Colombia, Ethiopia, Indonesia and Central American countries are also significant.

What moves coffee

• Brazilian weather. Brazil's harvest falls broadly in the middle of the year, and its winter brings frost risk to coffee-growing regions. A severe frost in July 2021 damaged trees and sent arabica prices sharply higher.
• Drought and rainfall in Brazil and Vietnam during flowering and growing periods.
• The Brazilian real. Coffee is priced in dollars but Brazilian producers' costs are in reais. A weaker real can encourage farmers to sell more, and vice versa, so currency moves can feed into prices.
• Stocks in exchange-certified warehouses and in consuming countries.
• Shipping and logistics, including freight costs and port delays.

Arabica set a series of records in late 2024 and early 2025, rising above 4 dollars a pound in February 2025 according to Reuters and other reports, after poor weather in Brazil and Vietnam.

Cocoa

Where cocoa comes from

Cocoa production is heavily concentrated in West Africa, with Côte d'Ivoire and Ghana by far the largest producers. Ecuador, Cameroon, Nigeria and Indonesia are also notable. Cocoa trees are grown mainly by small farmers, and in the two biggest producing countries the state plays a large role in marketing the crop and setting farm-gate prices.

There are two benchmark futures contracts: New York cocoa on ICE Futures US, quoted in US dollars per tonne, and London cocoa on ICE Futures Europe, quoted in pounds sterling per tonne. The two usually move together but can diverge because of currency moves and differences in deliverable origins.

The 2024 cocoa spike

Cocoa provides the clearest recent example of how fast softs can move. In 2024, after several poor harvests in West Africa linked to adverse weather and crop disease, cocoa futures rose to levels never seen before. New York prices more than doubled in the first months of the year and briefly went above 12,000 dollars a tonne in April. After a sharp pullback they climbed again, and in December 2024 Bloomberg reported prices above 12,000 dollars, with Reuters putting the record high at around 12,900 dollars a tonne.

Several features of that episode are worth knowing:

• Daily moves became enormous. Moves of several percent in a day became common, and the market saw large reversals as well as rallies.
• Exchange margins rose. When volatility rises, exchanges raise the margin required on futures. Higher margins made it more expensive for hedgers and speculators to hold positions, and reports described participants cutting back, which reduced liquidity and made moves more abrupt.
• CFD terms changed. Some providers widened spreads, raised margin requirements or restricted new positions in cocoa during the most volatile periods. That is a normal response to risk, but it caught traders who had assumed the terms were fixed.

The episode shows that a price chart's past range tells you little about the range it can reach. Anyone sizing cocoa positions on the volatility of 2023 would have been badly exposed in 2024.

What moves cocoa

• West African weather, including the dry, dusty Harmattan winds and rainfall during the growing season.
• Crop disease, such as black pod and the cocoa swollen shoot virus.
• Arrivals data: figures on how much cocoa has reached ports in Côte d'Ivoire, reported regularly by traders and the press.
• Grindings: quarterly figures on how much cocoa is processed in Europe, North America and Asia, used as a demand indicator.
• Policy in the producing countries, including farm-gate prices and export arrangements.

Sugar

Raw and white sugar

The main sugar benchmark is ICE Sugar No. 11 in New York, a raw cane sugar contract quoted in US cents per pound. White (refined) sugar trades in London on ICE Futures Europe as the No. 5 contract, quoted in US dollars per tonne. The gap between the two, known as the white premium, reflects the economics of refining.

Brazil is the world's largest sugar producer and exporter. India and Thailand are also major producers. Much of the world's sugar comes from cane grown in tropical regions, while sugar beet is grown in cooler climates such as Europe.

What moves sugar

• Brazil's centre-south harvest, which runs broadly through the middle of the year, and the regular crop reports on cane crushing and sugar output.
• The sugar and ethanol mix. Brazilian mills can turn cane into sugar or ethanol. When ethanol is more attractive, often linked to oil and domestic fuel prices, less sugar is produced. That ties sugar to energy markets.
• Indian export policy. India can restrict or allow exports, which changes the supply available on the world market.
• Monsoon rains in India and Thailand.
• The Brazilian real, for the same reasons as with coffee.

In recent years sugar has been less spectacular than cocoa, but it can still move by large percentages over a season.

How soft commodity CFDs work

Availability

Not every CFD provider offers softs. Those that do usually list coffee (arabica, sometimes robusta), cocoa (New York, London or both) and sugar (raw, sometimes white). Cotton and orange juice are less common. Check the instrument list before assuming you can trade a particular contract.

Futures-based pricing

Soft CFDs are almost always priced from a futures contract. They are either dated, expiring when the underlying contract does, or rolling, where the provider switches to the next contract and adjusts positions. Both approaches are explained in the guide to CFD rollover and expiry. The difference between contract months can be large in softs, especially when the market is tight, so roll adjustments matter.

Quote units and point value

Because the underlying contracts use different units, the CFD point value differs by product and by provider. One coffee CFD might be worth 10 dollars per cent per pound; another provider's might be worth something different. Cocoa might be worth 1 dollar or 10 dollars per one-dollar move per tonne. Always read the contract specification; the guide to CFD contract specifications shows what to look for.

Trading hours

Soft futures trade in shorter sessions than energy or index futures, generally from European morning to early afternoon New York time, with variations by contract. Your CFD can only be traded when the provider is quoting it, and prices often gap between the close and the next open. The market hours tool shows the main sessions in your time zone, but check the specific hours your provider gives for each soft.

Leverage

For retail clients in the EU and UK, leverage on commodity CFDs other than gold is capped at 10:1, meaning a minimum margin of 10% of the position's value. Providers can require more, and often do for volatile softs. The ESMA leverage limits guide explains the full set of caps and the margin close-out rule.

Costs

Expect wider spreads than on major energy or index CFDs, overnight financing on positions held past the daily cut-off, and roll adjustments on rolling contracts. The guide to CFDs on stocks, indices and commodities compares how these costs work across asset classes.

Worked example: sizing a coffee CFD

Illustrative numbers only. Your account is 10,000 US dollars and you risk 1% per trade, so 100 dollars. Your provider's arabica coffee CFD is quoted in cents per pound, with 1 contract worth 10 dollars per 1 cent move, and a minimum size of 0.1 contracts. That means 1 contract represents 1,000 pounds of coffee.

The price is 350.00 cents per pound (3.50 dollars). You plan a long position with a stop 12 cents below entry.

• Risk per contract: 12 × 10 = 120 dollars.
• Position size: 100 ÷ 120 = 0.83 contracts, rounded down to 0.8.
• Planned loss at the stop: 12 × 10 × 0.8 = 96 dollars.
• Position value: 1,000 pounds × 3.50 dollars × 0.8 = 2,800 dollars.
• Minimum margin at 10:1: 280 dollars. If your provider requires 20% for coffee, it would be 560 dollars.

What a gap does

Suppose a frost report comes out overnight while the exchange is closed, and coffee opens 25 cents lower the next morning, well below your stop.

• Loss at the opening price: 25 × 10 × 0.8 = 200 dollars, or 2% of the account, twice what you planned.

Stops cannot be filled while the market is closed, so they are filled at the first available price. That is the main hazard in softs, covered in more detail in the guide to gap risk and weekend risk. One way to account for it is to size for a plausible gap rather than for the stop alone. If you assume a 25-cent gap is possible, 100 ÷ (25 × 10) = 0.4 contracts.

A cocoa example: volatility scaling

Illustrative numbers. Suppose cocoa trades at 8,000 dollars a tonne and a provider's CFD is worth 1 dollar per 1-dollar move per contract (1 tonne). In a calm period the market's average daily range might be around 2%, or 160 dollars. In a volatile period like 2024 it might be 6%, or 480 dollars.

• With a stop of 1.5 times the daily range, the calm-period stop is 240 dollars and the volatile-period stop is 720 dollars.
• To risk 100 dollars: 100 ÷ 240 = 0.41, rounded down to 0.4 contracts in the calm period, but 100 ÷ 720 = 0.13, rounded down to 0.1 contracts, in the volatile one.

The same risk budget buys roughly a third of the position when volatility triples. Many traders measure this with the average true range. The instruments position size calculator and the margin calculator help with the arithmetic.

Softs and seasonality

Each soft has a crop calendar: Brazil's coffee harvest and frost season, West Africa's main and mid cocoa crops, Brazil's sugar harvest. These matter because they tell you when weather and crop reports are most likely to move prices. They do not provide reliable seasonal price patterns, for the reasons set out in the guide to commodity seasonality.

Common mistakes

• Assuming the past range is the future range. Cocoa in 2024 is the obvious reminder.
• Trading without reading the specification. Quote units, point value and roll dates differ between products and providers.
• Ignoring the hours. A position opened late in the day may sit through a long closed period and open with a gap.
• Holding through rolls without checking the curve. When nearby contracts trade at a large premium or discount to later ones, the roll adjustment can be significant.
• Expecting terms to stay fixed. Providers can raise margins, widen spreads or restrict new positions in extreme conditions.
• Treating weather stories as signals. By the time a drought is in the news, it may already be in the price.

Most retail CFD accounts lose money, and smaller, gappy markets such as softs can make losses arrive faster than in major markets. See the risk warning before trading any leveraged product.

Frequently asked questions

What are soft commodities?

Soft commodities are agricultural products that are grown rather than mined or extracted. The term most often refers to coffee, cocoa and sugar, and sometimes cotton and orange juice. Their benchmark futures trade on ICE exchanges in New York and London.

Why did cocoa prices rise so much in 2024?

Several poor harvests in West Africa, where most of the world's cocoa is grown, were linked to adverse weather and crop disease. With stocks falling and supply unable to respond quickly, futures rose to record levels, exceeding 12,000 dollars a tonne in New York during 2024. Higher exchange margins and reduced participation made moves more abrupt.

What is the difference between arabica and robusta coffee?

Arabica is generally used for higher-quality coffee and its benchmark trades in New York in US cents per pound. Robusta is hardier, has a stronger taste, is widely used in instant coffee and blends, and its benchmark trades in London in US dollars per tonne. Brazil leads arabica production and Vietnam leads robusta.

Can I trade coffee, cocoa and sugar with CFDs?

Some CFD providers offer them, usually as contracts based on ICE futures. Not every provider lists them, hours are shorter than for most CFDs, and contracts either expire or roll. Retail leverage in the EU and UK is capped at 10:1, and providers may require more margin for volatile softs.

How is sugar linked to oil?

Brazilian mills can turn sugar cane into sugar or into ethanol, which is used as a fuel. When ethanol is relatively attractive, often because of energy prices and domestic fuel policy, mills make less sugar, which can support sugar prices. The link is indirect and varies over time.

Why do soft commodity CFDs gap so often?

The underlying futures trade for a relatively short part of the day, so news that arrives while the exchange is closed, such as a weather or crop report, is reflected in a single jump at the next open. Stop orders cannot be filled during the closed period and are executed at the first available price.