The Rising Price of Coffee: What’s Behind It

The Rising Prices of Coffee: What to Expect

The price of coffee is expected to continue rising until mid-2025 due to supply shortages from major growers, with European consumers set to pay even more for their caffeine fix due to new regulations on deforestation.
Giuseppe Lavazza, president of coffee roaster Luigi Lavazza SpA, predicts this trend of escalating costs for the agricultural commodity.

Arabica coffee futures rose to over $2.4 per pound on Wednesday, July 10, nearing a two-year high of around $2.5 reached in April.
Robusta coffee prices have also increased by 63% this year, hitting a peak on Tuesday, July 9, at $4,667 per ton on the ICE Futures Europe market in London.

Factors Driving Price Increase

Supply constraints caused by slow exports from Vietnam and weather-related issues are pushing prices up.
Lavazza warns that European roasters will be paying a premium for coffee due to these challenges.
The industry is facing strong headwinds, with multiple risk factors contributing to a potential coffee crisis.

Concerns about the upcoming harvest are adding to supply fears after adverse weather in Vietnam damaged coffee trees earlier in the year.
The country reported a 10.6% year-on-year decline in coffee exports from January to June.
Slow sales from Vietnam are expected to continue, leading to limited supplies until the next harvest resumes in November.

Production Challenges and Opportunities

Brazil, a major coffee-growing region, has also been dealing with adverse weather conditions, driving up Arabica prices.
However, the production challenges faced by Vietnamese Robusta producers have created an opportunity for Brazil to expand its Robusta production, potentially becoming the world’s top Robusta producer in the coming years.

As coffee prices surge along with increased shipping costs and currency fluctuations, Italian roasters have seen their costs rise significantly in recent years.
The rise in coffee prices is also attributed to factors like disruptions in the Suez Canal and a strengthening dollar.

Market Outlook

Despite tightening coffee supplies, global demand continues to rise.
The International Coffee Organization has forecast a 2.2% increase in global coffee consumption for the 2023/24 season, with expectations of further growth in the following year.

The growing demand is driven by emerging coffee markets and coffee-producing countries like China, India, Indonesia, the Middle East, and Vietnam, which have seen a rise in domestic coffee consumption.
However, the implementation of the EU Deforestation Regulation is expected to further limit future coffee supply.