Coffee prices have reached a 47-year high. Arabica futures recently hit $3.35 per pound, a 70% increase this year.
The rise stems from fears of extreme weather and droughts in Brazil and Vietnam, the top coffee producers. Vietnam faced a severe drought followed by heavy rains, delaying its harvest.
Saxo Bank’s Head of Commodity Strategy Ole Hansen highlighted these challenges in his analysis, noting significant concerns for Brazil’s 2025 Arabica crop.
Weather Disruptions Drive Market Uncertainty
Brazil, the largest Arabica producer, suffered its worst drought in decades before October rains arrived. However, soil moisture remains low, raising doubts about crop yields and pushing up Intercontinental Exchange (ICE) prices.
March Arabica futures traded at $3.14 per pound on Thursday, recovering after a brief dip from November’s $3.35 peak. Arabica prices have surged 70% this year, while Robusta prices rose over 60%.
Demand continues to climb, driven by growing consumption in China. Yet, only a few countries, including Brazil, Vietnam, Colombia, Indonesia, and Ethiopia, meet global coffee demand. These tropical regions are highly vulnerable to climate change impacts.
Shipping Disruptions and Reduced Production
Houthi attacks in the Red Sea have further disrupted shipping routes, adding uncertainty and fueling price hikes.
The US Department of Agriculture (USDA) recently lowered its forecast for Brazil’s 2024/25 coffee production to 66.4 million bags, down from 69.9 million. This modest growth reflects severe weather conditions that reduced earlier estimates.
Consumers are already feeling the pinch. Nestlé SA, the world’s largest coffee producer, announced further price hikes for coffee products, including Nespresso capsules, according to Yahoo Finance.
