The coffee market in 2024 proved to be a rollercoaster of unprecedented highs and dramatic turns, leaving an indelible mark on producers, traders, and consumers alike. Starting the year at 177 c/lb, Arabica coffee prices surged to a historic high of 348.35 c/lb on December 9, an astonishing increase of 171.50 c/lb. The market eventually closed the year at 319.75 c/lb, reflecting an impressive 80% rise from January.
Arabica: The Perfect Storm of Supply and Demand
The meteoric rise in Arabica prices can be attributed to a classic case of supply and demand dynamics. Key producing countries like Honduras and Peru reported output declines of around 15%, while projections for Brazil’s pivotal 2025 crop fell short of expectations. Early indicators from Brazilian fields, compounded by Volcafe’s December forecast of an 11-million-bag deficit due to drought, confirmed fears of a supply crunch. If realized, this shortfall could lead to a fifth consecutive year of global coffee deficits.
Volcafe’s projection of just 34.4 million bags of Arabica from Brazil highlights the gravity of the situation, setting the stage for a supply-demand gap of 8.5 million bags in the 2025-26 season.
Robusta: A Parallel Story of Tight Supply
Robusta prices outpaced Arabica in percentage terms, starting 2024 at $2,570/mt and closing at $4,875/mt, marking an 89.5% increase. Vietnam’s 2022/23 harvest underperformed, and hopes are pinned on improved figures for the current season. With Robusta maintaining its elevated price levels, Arabica remains under additional upward pressure, limiting the likelihood of a significant price drop in the near term.
Speculators and the Coffee Market Surge
While supply shortages fueled the initial rally, speculators added significant momentum to the bull market. Coffee emerged as one of 2024’s best-performing commodities, drawing investors eager to capitalize on its growth. Speculators’ strong Net Long Positions suggest continued optimism, though predicting the peak remains elusive.
The Dollar Effect: A Double-Edged Sword
Adding complexity to 2024’s coffee market was the US Dollar’s extraordinary strength. This surge, driven by economic resilience, tempered Federal Reserve policies, and geopolitical factors, amplified the pain for British and European roasters. For instance, a comparison between the 2011 and 2024 spikes reveals that currency dynamics have exacerbated pricing challenges:
- 2011: 300 c/lb at GBP/USD 1.60 = £4,133/MT
- 2024: 320 c/lb at GBP/USD 1.25 = £5,643/MT
Such disparities underscore the compounding effects of currency fluctuations on coffee pricing, particularly for international buyers.
The Road Ahead: Navigating Challenges
As 2024 demonstrated, high coffee prices have a cascading impact across the supply chain. From producers and exporters to roasters and consumers, the financial strain requires adaptation and resilience. Many roasters have already implemented price increases, and further adjustments may be inevitable to ensure sustainability.
While 2025 brings uncertainty, the lessons of 2024 are clear: the coffee industry must prepare for continued volatility. Stay informed with our weekly market updates as we navigate the dynamic coffee landscape together.
Strap in—2025 promises to be another unforgettable chapter in the story of coffee.