Coffee prices are on a record-breaking rally with no signs of slowing down, analysts say, warning it could take years for the market to stabilize.
Arabica coffee futures for March delivery surged to an intraday high of 348.35 cents per pound on Tuesday, the highest level in nearly 50 years. While prices have eased slightly, they remain up by an astonishing 70% year-to-date. The last time arabica beans, the world’s most popular coffee variety, reached such levels was in 1977 when snow devastated Brazil’s coffee plantations.
Arabica beans, known for their smooth taste and sweet flavor, account for 60-70% of global coffee consumption, commonly used in espressos and specialty coffee drinks. The price surge is attributed to severe drought and high temperatures in key coffee-producing regions, particularly Brazil, along with global reliance on a few key suppliers.
Robusta futures, used in instant coffee blends and known for their bitter taste, also hit a record high in late November.
Brazil’s Weather Woes Fuel Fears for Coffee Supply
The extraordinary price spike comes as Brazil, the largest coffee producer, grapples with its worst drought in 70 years, followed by heavy rains that threaten the flowering of next year’s crop.
Ole Hansen, head of commodity strategy at Saxo Bank, noted that these weather conditions have raised concerns about the 2025 crop. “The combination of drought and heavy rains in quick succession has created fears of significant crop failure,” Hansen wrote in a research note.
David Oxley, chief climate and commodities economist at Capital Economics, echoed these concerns. “Coffee prices are unlikely to ease until supply improves and stock levels recover—a process that history shows can take years, not months,” Oxley said in a November report.
Coffee’s Unique Vulnerability to Climate
Coffee production, concentrated in a narrow tropical band, is especially sensitive to adverse weather. Brazil and Vietnam alone account for 56% of global coffee production, making the commodity particularly vulnerable to climate disruptions.
“Like cocoa, coffee’s reliance on a limited number of producers creates significant risks when weather conditions turn unfavorable,” Hansen said.
The U.S. Department of Agriculture (USDA) recently revised its production forecast for Brazil for the 2024/2025 marketing year to 66.4 million 60-kilogram bags, a 5.8% decline from previous projections. The USDA attributed the drop to irregular weather patterns impacting crop development, particularly for arabica coffee trees.
Carlos Mera, head of agricultural commodities at Rabobank, highlighted the ongoing challenges. “This will be the fifth consecutive disappointing arabica harvest in Brazil due to adverse weather,” Mera told CNBC.
Growing Demand, Limited Supply
Coffee’s popularity continues to grow, with rising demand in markets like China further straining global supply. With production unable to keep pace, prices may remain elevated for the foreseeable future, analysts say.
This ongoing rally underscores coffee’s vulnerability to climate impacts and the long-term challenges facing global supply chains.
