Inclement weather in key coffee-producing countries and rising shipping costs push coffee prices up by nearly 39 per cent, with further increases possible in 2025

World coffee prices surged to a multi-year high in 2024, rising by 38.8 per cent compared to the previous year, according to the Food and Agriculture Organization (FAO). The price hikes were primarily driven by adverse weather conditions in key coffee-producing countries, along with supply constraints and higher shipping costs.

In December 2024, Arabica coffee, favored in the premium roast and ground coffee market, saw a price increase of 58 per cent year-on-year, while Robusta coffee, commonly used in instant coffee and blends, experienced a 70 per cent rise in real terms. This marks a narrowing of the price gap between the two varieties for the first time since the mid-1990s, signaling significant shifts in the global coffee market.

Several factors contributed to the sharp rise in coffee prices, including reduced production in major producing countries like Vietnam, Indonesia, and Brazil. In Vietnam, prolonged dry weather led to a 20 per cent drop in coffee production for the 2023-24 season, with exports falling by 10 per cent for the second consecutive year. Similarly, excessive rains in Indonesia in April and May 2023 caused a 16.5 per cent decline in coffee production, and exports dropped by 23 per cent.

Brazil, the world’s largest coffee producer, also faced challenges due to extreme weather conditions. Dry and hot weather forced successive downward revisions to Brazil’s coffee production forecast, which went from an expected 5.5 per cent year-on-year increase to a 1.6 per cent decline. This has further exacerbated the global supply shortage and pushed prices upward.

The FAO also pointed to rising shipping costs as another contributor to the surge in global coffee prices. By December 2024, US consumers were paying 6.6 per cent more for coffee, while the European Union saw a 3.75 per cent increase compared to the same period in 2023.

Looking ahead, the FAO warned that coffee export prices could rise even further in 2025 if key growing regions experience additional significant supply disruptions.

Boubaker Ben-Belhassen, Director of FAO’s Markets and Trade Division, highlighted the long-term impact of climate change on coffee production, stressing the need for more investments in technology and research to increase climate resilience. “The high prices should provide incentives to invest more in technology and research and development in the coffee sector – which relies largely on smallholder farmers – to increase climate resilience,” he said. FAO is already supporting coffee-producing nations in adopting climate-resilient techniques to help restore biodiversity loss and improve sustainability.

Coffee plays a vital role in the global economy, with smallholder farmers accounting for 80 per cent of global coffee production. Brazil and Vietnam together account for nearly 50 per cent of the world’s coffee supply. The global coffee industry generates more than USD 200 billion annually, with coffee exports contributing significantly to the economies of countries like Ethiopia, Burundi, and Uganda.

With the coffee industry facing both short-term price spikes and long-term climate challenges, market transparency and international cooperation will be crucial to sustaining the growth of the global coffee sector and supporting the livelihoods of millions of smallholder farmers worldwide.