Coffee prices have reached their highest levels since 1977, hitting $3.35 per pound on commodity market futures. This marks a 70% increase since the start of the year. Fears of extreme weather and droughts in Brazil and Vietnam, the largest coffee producers, have driven up prices.
Vietnam faced a prolonged drought followed by heavy rains, delaying the coffee harvest. Ole Hansen, Head of Commodity Strategy at Saxo Bank, said adverse weather in Vietnam has now shifted concerns to Brazil, impacting the 2025 Arabica crop.
Brazil, the top Arabica producer, endured its worst drought in decades before October rains slightly eased conditions. However, low soil moisture has raised fears that crops may fall short, pushing up Intercontinental Exchange (ICE) prices.
On Thursday, Arabica futures for March delivery traded at $3.14 per pound, rising after correcting from the $3.35 peak on November 29. Both Arabica and Robusta prices have surged this year, gaining 70% and 60%, respectively.
Climate Change and Supply Chain Issues
Global coffee demand continues to rise, driven by growing consumption in countries like China. However, only a few tropical countries, including Brazil, Vietnam, and Ethiopia, produce coffee. These nations face significant climate change impacts, further straining supply.
Houthi attacks on shipping routes in the Red Sea have disrupted shipments and fueled price increases. Meanwhile, the US Department of Agriculture (USDA) recently lowered Brazil’s 2024/25 coffee production forecast from 69.9 million to 66.4 million bags, still slightly above last season’s output.
USDA attributes the limited growth to adverse weather in key coffee regions. Nestlé, the world’s largest coffee producer, has announced further price hikes for products like Nespresso pods, reflecting rising market costs. Consumers worldwide are beginning to feel the effects of these escalating prices.