You may have noticed that the price of coffee is increasing. And for good reason, the price of Arabica coffee is soaring. It also reached its highest level in almost fifty years on Wednesday November 27, 2024, or 320.10 cents.
Droughts in Brazil raise fears of poor harvest
The world’s leading producer, Brazil is affected by significant droughts. Farmers fear that harvests will be very poor this year. “In this context of uncertainty, they choose to only sell what is necessary, thus limiting the supply of coffee on the local market,” explains to theAFP Guilherme Morya, of Rabobank, an international bancassurance financial institution. And what becomes rare becomes expensive.
After a “long dry and hot period”, coffee trees in Brazil had benefited from “significant rain” in October, contributing to “exceptional flowering in most arabica coffee-producing regions”, specifies Guilherme Morya. But the analyst notes a “uncertainty over the progress of flowering, which raises significant concerns” for the 2025-2026 harvest. Because if the flowers do not attach themselves to the branches of the coffee tree, they will not be able to later transform into cherries, which contain the coffee beans.
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The price of robusta coffee also hits a record
In addition to weather conditions, geopolitical factors can also explain the surge in coffee prices. Disruptions to maritime transport in the Red Sea, potential US customs duties and the future European Union regulation on deforestation are helping to support the prices of raw materials in general and coffee in particular.
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Vietnam, the leading producer of the robusta variety, used for example for instant coffee, is not immune to the fears weighing on supply. Listed in London, robusta now trades around $5,200 per tonne. In mid-September, it also reached a record price of $5,829, unheard of since the opening of the current reference contract in 2008. This price would even be unprecedented since the 1970s according to the Bloomberg agency.
