The global coffee trade is facing a significant slowdown, with prices for coffee beans soaring to new heights, causing major disruptions in the market.
According to reports, the steep increase in coffee prices has led suppliers to drastically cut back on their purchases, resulting in a near halt in the international coffee trade.
The Surge in Coffee Prices Takes Everyone by Surprise
At the recent U.S. National Coffee Association convention in Texas, industry insiders were left stunned by a shocking 70% surge in arabica coffee futures on the ICE exchange.
Renan Chueyri, CEO of Ecuador’s Elcafe, revealed that his company was unable to meet its usual sales targets for instant coffee.
Demand has dropped significantly as high prices have reduced buyers’ purchasing power, leaving many unable to afford the necessary volumes of coffee beans.
Chueyri explained, “Normally, we would have sold everything by now, but so far, we’ve only sold about 30% of our planned volume.
The price increase is draining funds, leaving buyers unable to make purchases.”
Experts Say the Market Is Facing Challenging Times
The sharp price rise is largely attributed to reduced production in key coffee-growing regions, including Brazil, one of the world’s largest coffee producers.
However, experts suggest that the situation may improve by the end of the year, with prices potentially falling by 30% due to weakening demand.
Additionally, Brazil is expected to have a strong coffee harvest, which could help stabilize the market.
Despite these forecasts, the market remains tough, with some U.S. coffee roasting companies expressing uncertainty about their future.
One senior executive mentioned that some businesses are struggling to adjust to the new prices, with some even facing the possibility of bankruptcy.
As a result, coffee shortages are being reported in some U.S. retail stores, and storage warehouses near U.S. ports are only half full.
Some companies have already canceled their warehouse leases due to the ongoing disruptions.
Is the Coffee Market Heading for a Price Drop?
Commodity trader Louis Dreyfus believes that prices might eventually come down as coffee plantations in India, Uganda, Ethiopia, and Brazil expand.
Combined with a strong Brazilian harvest, this could lead to a significant price drop and ease some of the pressure on global coffee prices.
Record High Prices for Both Arabica and Robusta Coffee
The surge in coffee prices has affected both major coffee varieties—arabica and robusta.
Arabica coffee has hit prices not seen since 1997, while robusta has reached record highs, with prices not seen since the 1970s.
Arabica futures for March delivery reached $3.22 per pound, while robusta prices surged by 85% in the UK since the beginning of 2024.
Brazil’s ongoing drought, which is considered the worst since 1981, has significantly impacted the harvest, driving up prices.
The U.S. Department of Agriculture predicts a smaller-than-expected coffee harvest in Brazil for 2024–2025, with stockpiles expected to fall 26% lower than the previous period.
Costa Rica also suffered heavy rains that destroyed about 15% of its arabica crop.
The Impact of Weather on Coffee and Cocoa Prices
In addition to coffee, cocoa prices are also on the rise, reaching over $12,000 per ton for the first time.
Increased shipments have not been able to offset the shortage caused by weather conditions and plant diseases, resulting in a 30% surge in cocoa prices between November and December alone.
David Oxley, an economist at Capital Economics, suggests that coffee prices may remain high for several years.
A decline is not expected until production recovers and stockpiles increase.
The Coffee Beans That Keep the World Buzzing
Arabica coffee, often seen as the more delicate and flavorful variety, makes up about 60% of global coffee production.
Robusta, which is more bitter and has a stronger flavor, accounts for the remaining 40%. Arabica is generally preferred for high-quality coffee, while robusta is often used for instant coffee.
With the current state of the coffee market, it’s clear that these high prices are not just affecting suppliers and roasters but are also making their way to coffee drinkers around the world.
The future of coffee trade and pricing remains uncertain, but it’s clear that the world’s favorite beverage is facing some serious challenges.