Coffee prices are “flying” - The causes are unfavorable climatic conditions and export restrictions
World coffee prices reached a multi-year high in 2024, rising 38.8 percent from the average a year earlier, largely driven by bad weather affecting major producing countries, the United Nations Food and Agriculture Organization (FAO) said.
According to a report by the Agency on global coffee market trends, in December 2024, Arabica, the higher-quality variant favored in the roasted and ground coffee market, was sold for 58 percent more than a year earlier, while Robusta, used mainly for instant coffee and blends, saw a price increase of 70 percent in real terms. This marked a narrowing of the price difference between the two varieties for the first time since the mid-1990s.
The Food Agency said coffee export prices could rise further in 2025 if key growing regions experience further significant supply reductions.
The main factors that influenced the recent price increase include limited export quantities from Vietnam, reduced production in Indonesia and adverse weather affecting Brazilian production.
In Vietnam, dry weather caused a 20 percent drop in coffee production in 2023/24, with exports falling by 10 percent for the second consecutive year. Similarly, in Indonesia, production in 2023/24 fell by 16.5 percent year-on-year, as excessive rainfall in April-May 2023 damaged coffee beans. Exports fell by 23 percent.
In Brazil, dry and hot weather conditions caused successive downward revisions to the 2023/24 production forecast, with official estimates going from a 5.5 percent year-on-year increase to a 1.6 percent decline.
Higher transportation costs were also found to be one of the factors contributing to the increase in world coffee prices.
Early data shows that in December 2024, rising world prices forced consumers to pay 6.6 percent more for their coffee in the United States and 3.75 percent more in the European Union, compared to the same period in 2023.
"High prices should provide incentives to invest more in technology and development in the coffee sector, which relies mainly on smallholder farmers, to increase climate resilience," say official sources from the Food and Agriculture Agency, adding that climate change is affecting coffee production in the long term. The organization supports many coffee-producing countries to help farmers adopt climate-resilient techniques that also contribute to restoring biodiversity loss.
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