Coffee prices have reached $3.35 per pound, the highest level since 1977. This marks a 70% increase since January. Concerns over extreme weather in Brazil and Vietnam, the top coffee producers, are driving the surge.
Vietnam suffered prolonged drought followed by torrential rains, delaying its coffee harvest. Similarly, Brazil’s coffee crops face challenges due to low soil moisture despite recent rains.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, highlighted the issue in his market analysis. He noted Brazil’s adverse weather raises serious concerns for the 2025 Arabica crop.
Droughts, Shipping Challenges Impact Markets
Brazil, the leading Arabica producer, dealt with its worst drought in decades before October rains. However, the moisture deficit persists, fueling fears about lower yields and increasing prices.
Arabica futures for March traded at $3.14 per pound on Thursday, rebounding slightly after falling from the November 29 peak of $3.35.
Arabica prices have risen 70% this year, while Robusta gained over 60%. Coffee remains one of the world’s most traded commodities, with rising demand driven by growing consumption in China.
Few countries produce coffee in significant quantities. Brazil, Vietnam, Colombia, Indonesia, and Ethiopia face challenges as climate change intensifies extreme weather patterns.
Houthi attacks in the Red Sea have also disrupted shipping, adding to price uncertainty.
The USDA reduced Brazil’s 2024/25 production forecast to 66.4 million bags, down from 69.9 million. This minor growth reflects adverse weather that hurt earlier estimates.
Consumers feel the pinch as companies like Nestlé continue raising prices, including for Nespresso products.