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There are growing concerns about the crop in Brazil and Vietnam, the world’s biggest coffee producers.
ADVERTISEMENTCoffee prices have hit a 47-year high.
That is as a result of commodity market futures (contracts to buy or sell in the future at a given price) for the Arabica coffee recently reaching $3.35 per ounce (453 grams). That is 70% more than at the beginning of the year, and levels not seen since 1977.
Prices have been pushed up because of fears about the effects of extreme weather and intense droughts in top coffee-producer countries such as Brazil and Vietnam.
The latter has experienced a long drought followed by torrential rains that have delayed the harvest.
“A challenging growing season in Vietnam, the top producer of Robusta beans, has now moved to Brazil where adverse weather has raised serious concerns about the 2025 Arabica crop,” writes Head of Commodity Strategy at Saxo Bank Ole Hansen in his recent analysis of the commodity markets.
Droughts and downpours
Brazil, the main Arabica bean producer, was grappling with the worst drought in decades before rains finally arrived in October. Even so, soil moisture remained low, boosting concerns that crops would not live up to expectations, thus pushing up the benchmark Intercontinental Exchange (ICE) prices.
The Arabica futures for March delivery traded for $3.14 per pound on the ICE on Thursday afternoon, inching upwards again after a few days of correction from the record levels of $3.35 reached on 29 November.
Out of the two types of coffee traded on the commodity market, Arabica’s price has gained almost 70% year-to-date, while Robusta’s has gained more than 60%.
Coffee is one of the most traded commodities in the world, and demand has been on the rise, boosted by growing consumption in China. However, there is only a handful of producer countries to meet this demand. The key producers include Brazil, Vietnam, Colombia, Indonesia, and Ethiopia, all tropical countries that are very much impacted by climate change.
Shipping routes under attack
The Houthi attacks in the Red Sea have also contributed to the uncertainty and fuelled price hikes as they affect shipments.
The US Department of Agriculture (USDA) has recently reduced its 2024/25 coffee production forecast from 69.9 million (60 kg) bags to 66.4 million bags, which is still 0.2% more than in the previous season. “This timid growth comes in the aftermath of a strong period of adverse weather conditions in the main producing regions, which led to a decrease in initial estimates for the season,” says USDA in their report.
Consumers may already feel the impact of the market price hikes, as the world’s biggest coffee producer, Nestle SA announced two weeks ago that they would continue raising their coffee prices, including products such as Nespresso pod capsules, according to Yahoo Finance.
