Arabica, the world’s most popular coffee variety, has reached an unprecedented price level, driven by severe weather conditions in Brazil, the largest producer of Arabica. Consumers are expected to feel the impact of this price surge by early 2025.
A Historic Price Surge
On December 10, March futures for Arabica reached a record-breaking $3.34 per pound (approximately 0.45 kg). This represents the highest price ever recorded in trading history and an 80% increase compared to last year. Robusta, another popular coffee variety, also hit its own record high in September.
So far, coffee roasters have been holding off on raising retail prices to maintain market share. However, according to Tuan Loc Commodities’ CEO, the situation is likely to change in the first quarter of 2025, as companies will no longer be able to avoid passing on these costs to consumers.
Several major companies have already announced plans to adjust their prices. A representative from Lavazza indicated that price adjustments are necessary to maintain product quality and consumer trust. Reports suggest that another major company plans to increase its coffee prices by up to 30%, citing the high costs of Brazilian raw materials.
Coffee Prices in Russia
In Russia, reports indicate that price increases in coffee shops are unlikely before March or summer 2025. However, prices have already risen by 15–30% in cafes over the past year, outpacing official inflation rates.
In supermarkets, coffee prices have risen by no more than 10%, despite a 20% increase in procurement costs. Retailers have reportedly worked to minimize the impact on consumers.
What’s Happening in the Coffee Market?
The historic price hike for Arabica is primarily attributed to extreme weather in Brazil. In August and September 2024, Brazil experienced its worst drought in 70 years, followed by heavy rains in October. These weather conditions disrupted the harvest season and preparation of seedlings for the next season.
Vietnam, the largest producer of Robusta, also faced unstable weather, including droughts and heavy rains, further impacting global supply.
At the same time, global demand for coffee continues to rise. Even in countries like China, traditionally known for tea consumption, coffee consumption has doubled over the past decade.
Speculation and Market Uncertainty
In addition to climate-related challenges, economic speculation plays a significant role in the price surge. According to industry experts, the coffee market remains highly speculative as it awaits the next harvest season.
A Silver Lining for Small Farmers
While high prices may concern consumers, they offer a glimmer of hope for small-scale farmers. According to industry reports, 80% of global coffee production comes from small farms, and rising prices provide an opportunity for increased income.
One coffee industry expert noted: “Higher prices finally allow farmers to earn a fair wage for their hard work.”
Climate Change and the Future of Coffee
Arabica coffee plants are highly sensitive to climate changes. They require temperatures between 15 and 24 degrees Celsius, as well as adequate shade and rainfall. As climate change accelerates, the areas suitable for growing Arabica are shrinking.
A 2022 study predicts that by 2050, the regions suitable for Arabica cultivation in Latin America, Africa, and Asia will significantly decline. In contrast, Robusta is more resilient to hot climates, making it a more sustainable option for the future.
Conclusion
The coffee market is facing significant challenges, with rising prices reflecting both climate-related disruptions and growing demand. While consumers may bear the brunt of these changes, small farmers stand to benefit from fairer earnings. The key question remains: how will the coffee industry adapt to climate change and evolving market demands?