|
First Sip
Coffee is a daily ritual for billions and the price you pay for that cup has become anything but routine. In the past year, global coffee prices have surged
driven by extreme weather, international tariffs, and mounting pressure from
growing consumer markets. The result are record high cost in green coffee bean futures, supply chain strains, and steadily increasing prices at your favorite coffee shop and local supermarket. Let's take look at why consumers are paying more for a cup of coffee.
I. Climate Change Is Crippling Coffee Production
Coffee is particularly sensitive to environmental conditions. Even slight shifts in rainfall or temperature can drastically reduce yields. In 2024 and early 2025, the three largest coffee producing nations, Brazil, Vietnam, and Indonesia, were hit hard by prolonged drought that decimated harvests and drastically reduced crop yields.
1. Brazil: The World’s Arabica Giant Feels the Heat
Brazil accounts for roughly 3,405,256 tonnes of green coffee beans. That’s 35 - 40% of global coffee production and is the largest supplier of Arabica beans, favored for their smooth, complex flavor. This dominant position is under serious threat.
According to a recent Reuters report, Brazil’s total coffee output for the 2025/26 cycle is forecast to drop by up to 6.4% down to 62.8 million 60 kg bags from 67.1 million in the previous year. The primary cause: historic drought across major growing regions, which significantly affected critical flowering in Arabica trees.
The consequences are staggering:
a) Arabica output could fall 13.6% to just 38 million bags.
b) Although Robusta (conilon) is expected to increase, the Arabica shortage will heavily impact specialty roasters and major brands that rely on Brazil for consistent supply.
c) Compounding the issue, replanting and yield recovery after drought takes multiple years, meaning shortages and price instability could last well into 2026 and beyond.
2. Vietnam: Robusta Beans Hit Hard
Vietnam is the world’s largest Robusta exporter responsible for over 40% of the global Robusta supply of beans that fuel instant coffee and many espresso blends.
In 2024, Vietnamese farmers battled their driest season in decades. Reservoirs in the Central Highlands dropped to critical lows with some districts receiving
less than 50% of normal rainfall. The lack of water forced farmers to abandon
large portions of their crop or reduce irrigation, severely affecting bean size
and density.
Preliminary estimates suggest Vietnam's Robusta output may decline by 10 - 15% in 2024/2025. Given the global dependence on Vietnamese Robusta for cheaper blends, the drop is contributing to a supply bottleneck and pushing prices higher across all quality levels.
3. Indonesia: Heatwaves and Harvest Loss
Indonesia, the fourth-largest coffee producer (2024) in the world, suffered a crippling heatwave throughout 2024 with average temperatures in Sumatra and Sulawesi exceeding historical norms by 2 - 3°C. The extreme heat, coupled with erratic rains, disrupted flowering and fruiting cycles. Farmers in Aceh and Lampung, two of Indonesia’s key Arabica regions reported up to 25% lower yields. Coffee quality has also suffered, with an uptick in bean defects and fungal diseases due to poor moisture balance.
II. Green Coffee Bean Futures Surge
The global coffee market reacted quickly to these supply disruptions.
Over the past 24 months, green coffee bean prices have experienced significant increases:
Arabica Beans: Prices have more than doubled, rising from under $2 per pound in early 2024 to peaks exceeding $4.30 per pound by February 2025.
Robusta Beans: Prices have surged by over 55% year-over-year, reaching approximately $5.69 per kilogram as of March 2025.
In the 12 months leading up to February 2025, Arabica coffee futures rose by over 70%, while Robusta futures climbed by 45%, according to data from the Intercontinental Exchange (ICE). These spikes reflect more than just drought. They represent cascading risks throughout the supply chain: lower inventories, increased speculative activity, and traders hedging against future shortages.
For context:
a) Arabica futures hit $2.25 per pound in early 2025, up from around $1.30 in early 2024.
b) Robusta reached $2,950 per metric ton, a 12 year high.
This price pressure is squeezing small roasters and forcing large multinational
coffee chains to raise retail prices, often more than once in a 12 month span.
III. Trade Barriers and Tariffs Add Another Layer
Even as climate issues batter supply, tariffs and trade policy are compounding costs. Coffee crosses multiple borders between farm and cup. Each step is vulnerable to political decisions.
1. Tariffs on Equipment and Inputs
While green coffee beans often move tariff-free under trade some agreements, the materials and machinery used in production do not. Farmers and processors in producing countries often import fertilizers, irrigation systems, or processing equipment from abroad.
Tariffs on Chinese steel have made drying racks, pulping machines, and storage silos more expensive. In Latin America, fertilizer imports from Europe and the U.S. have become costlier due to retaliatory trade measures.
These costs trickle up the chain, increasing the baseline cost per pound before beans even leave the country.
2. Tariffs on Packaging Materials
Coffee is a value added product meaning that the raw material, green coffee beans, undergoes a series of processes - roasting, grinding, packaging - that significantly increase its market value before it reaches the consumer. Packaging is a significant contributor. Import tariffs on packaging materials - especially in the EU and U.S. have raised the cost of:
a) Laminated bags with aluminum liners.
b) Plastic based zip locks and degassing valves.
c) Cardboard boxes for bulk transport.
Even sustainable packaging, which brands are adopting to meet recycling goals, is now more expensive to produce or import. And consumers, especially in Western markets, expect their coffee to come with sustainability credentials.
3. Logistics and Border Delays
Ongoing geopolitical tension (e.g., Red Sea shipping reroutes, U.S. - China relations) is contributing to longer shipping times and higher freight costs, particularly for beans exported from Asia and Africa to Europe and North America.
IV. Demand Boom: India, China, and the UK Fuel the Fire
The rapid growth in demand in new markets is final pressure point.
1. India: Domestic Market Expanding Rapidly
India, long seen as a tea-drinking nation, is embracing coffee in its urban centers. According to Stellar Market Research, the Indian coffee market is growing at 10.15% annually, driven by:
a) Rising disposable income.
b) An explosion of local and international café chains.
c) Youth driven interest in premium, craft, and cold brew coffee.
Domestic roasters and multinationals alike are sourcing more beans, reducing the pool available for export.
2. China: From Instant to Artisanal
China’s instant coffee market generated over $8.3 billion in 2024, and projections put it over $12 billion by 2030. But growth isn’t limited to convenience coffee:
a) Third wave cafes are opening in Shanghai, Shenzhen, and Chengdu.
b) Demand for single origin and traceable beans is rising fast.
Chinese importers are securing long-term contracts with Latin American and African producers, further tightening supply.
3. United Kingdom: Mature but Still Growing
The UK’s coffee culture is evolving. Despite market maturity, it still accounted
for 10.5% of global instant coffee sales in 2024. High street chains and specialty roasters are expanding beyond London, increasing bean imports even as prices climb
V. Rising Prices at the Supermarket and Café
These upstream cost increases are already hitting wallets.
Retail Impact
In the U.S., a 12-ounce bag of store brand whole beans has risen from $8.99 to over $12.49 at many major grocery chains since early 2024. In the UK, supermarket instant coffee jars are up 15 - 20% year over year. European café chains have raised prices on espresso drinks by an average of €0.30 - €0.50 since mid-2024.
The effects are even harsher in countries that rely entirely on imports and face
currency weakness against the U.S. dollar.
VI. Can Anything Be Done?
Solving the coffee price crisis isn’t easy, but there are paths forward.
1. Invest in Resilient Farming
All stakeholder must invest in programs that support:
a) Drought resistant coffee varieties.
b) Shade grown methods that protect trees.
c) Efficient irrigation systems.
These 3 factors help mitigate losses and stabilize farmer incomes.
2. Rethink Trade Policy
Harmonizing trade rules and reducing tariff barriers on production materials could ease upstream costs. Agreements that support sustainable farming (e.g., paying premiums for certified beans) also incentivize better practices.
3. Diversify Production Zones
Producing countries like Ethiopia, Uganda, Peru, and even California are investing in small-scale production to reduce global dependence on Brazil and Vietnam. While these won’t replace top producers, they can cushion supply shocks.
4. Educate Consumers
Higher prices may be the new normal, but transparency helps. If consumers understand what goes into their coffee - from climate risk to packaging to logistics - they’re more likely to support higher prices for sustainable, ethical sourcing.
Final Sip
Coffee’s New Reality
What was once a cheap luxury is now a bellwether for global volatility. Climate change, trade disputes, and booming global demand have collided, making coffee more expensive and more complex to produce than ever before.
Prices aren’t just rising. They’re reshaping how we grow, distribute, and drink
coffee. The industry, and the consumer, will need to adapt because this isn’t a
temporary spike. It’s the start of a new era for coffee.
|
