Global coffee prices have reached their highest levels in nearly a decade due to severe weather events affecting major coffee producers, Brazil and Vietnam, according to the International Coffee Organization (ICO). The drought in Brazil, the world's largest coffee producer, and powerful typhoons in Vietnam, the second-largest producer, have significantly disrupted global coffee supply chains, leading to increased production costs that are now being passed on to consumers.
Europeans consume approximately 3.2 million tons of coffee annually, accounting for nearly 33% of global coffee consumption, as reported by the German consumer data company Statista. Brazil produces about 40% of the world's coffee and is currently experiencing one of its worst droughts in decades, severely impacting arabica coffee growing regions and reducing yields.
The 2023-2024 harvest cycle has already seen a sharp decline in production, with some estimates suggesting a potential decrease of up to 20%. The hardest-hit area is Minas Gerais, Brazil's largest coffee-producing state, which has reported below-average rainfall for months.
While Brazil dominates the arabica market, Vietnam is the leading global producer of cheaper robusta beans used in instant coffee. Earlier this month, major coffee-growing regions in Central Highlands were devastated by Typhoon Yagi, which killed at least 60 people and injured hundreds. Initial assessments indicate that thousands of hectares of coffee plantations have been affected, leading to significant losses for both current and future production, as affected trees will take years to recover.
The combined effects of drought in Brazil and the typhoon in Vietnam have triggered a sharp rise in global coffee prices. The ICO reported that prices surged nearly 20% in the third quarter of 2024, reaching their highest levels in almost a decade. Futures contracts for arabica coffee traded on the Intercontinental Exchange (ICE) have dramatically increased, with prices currently exceeding €2.25 per pound, up from €1.62 at the beginning of the year. Robusta prices have followed a similar trajectory, rising approximately 25% to over €1,796 per metric ton.
These substantial price increases have caused shockwaves in the global coffee market. Coffee traders are facing heightened volatility, with growing concerns that ongoing weather-related disruptions and the costs of rebuilding after natural disasters could lead to further price hikes.
Carlos Mera, an agricultural commodities analyst at Rabobank, told Bloomberg that this crisis is exacerbated by logistical challenges, such as port congestion and a global shipping container shortage, complicating the flow of coffee worldwide.
The effects of rising costs are particularly pronounced in Europe. In Germany, the largest coffee market in Europe, retail prices for ground and whole bean coffee have increased by an average of 10% since 2022, according to Statista. A survey conducted by the European Coffee Federation (ECF) based in Brussels found that nearly 65% of coffee shops in Europe have raised prices by between 5% and 15% since the beginning of 2023.