Global coffee prices have increased sharply to their highest level in nearly 50 years as supply is in short supply compared to demand.
Adverse weather conditions in Brazil and Vietnam have caused global supply to be lower than demand for three years. This has led to a supply shortage and pushed the price on the ICE exchange to a peak of 3.36 USD/lb.
The last time coffee prices were traded at such high levels was in 1977 when snow destroyed many of Brazil’s coffee fields. Meanwhile, experts predict that coffee production will continue to decline this year.
Coffee prices hit a half-decade high.
Brazil, the country that produces nearly half of the world’s arabica coffee – the premium beans mainly used for roasting and grinding – has experienced one of the worst droughts ever recorded this year. Although rain finally arrived in October, soil moisture levels remain low, and experts say the bean yield is still too low because the trees are producing many leaves and few flowers.
In Vietnam, where about 40% of the robusta coffee beans typically used to make instant coffee are produced, a severe drought earlier this year was followed by heavy rains since October.
The consulting firm StoneX forecasts that Brazil’s arabica coffee production will decrease by 10.5% to 40 million bags next year, partially offset by higher robusta production, thereby reducing the country’s total coffee output by 0.5%. In Vietnam, the harvest could decrease by up to 10% by the end of September 2025, making the global robusta shortage more serious.
High prices will benefit farmers this harvest, but they will pose difficulties for traders who have to face high hedging costs on the exchange and compete to receive the coffee they had previously ordered.
The head of Nestle, the world’s largest coffee company, was fired earlier this year. The reason is that the board of directors was dissatisfied with the weak sales and loss of market share due to price increases, which caused consumers to seek out cheaper brands. Roasters tend to buy coffee months in advance, which means consumers may see a sudden price increase in the next 6 to 12 months.
On the Vietnamese side, the Ministry of Agriculture and Rural Development said that coffee exports in November continued to decline compared to October, despite the coffee harvest having begun. 45,000 tons of coffee were exported in November, worth 261.8 million USD.
In 11 months of 2024, Vietnam exported nearly 1.2 million tons, worth 4.84 billion USD, a decrease of 15.4% in volume but an increase of 32.8% in value compared to the same period in 2023.
The average export price of coffee in 11 months of 2024 is estimated at 4,037 USD/ton, an increase of 56.9% compared to the same period last year.