Coffee lovers in Europe are bracing for further price hikes following extreme weather events that hit the world’s two largest coffee-producing countries.
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Between the drought in Brazil, the world’s largest coffee producer, and the violent typhoons that hit Vietnam, which comes in second place, global supply chains have been widely disrupted in recent months, which has not failed to lead to an increase in production costs that is reflected in sales prices, and ultimately in consumers’ wallets.
In Europe, which is one of the regions of the world where the most precious nectar is consumed, this price increase is likely to be particularly difficult to swallow. Because Europeans consume nearly 3.2 million tons of coffee per year, which represents nearly 33% of the total coffee consumption worldwide, according to the German consumer data company Statista.
Natural disasters have wreaked havoc
Brazil, which produces about 40% of the world’s coffee, is facing one of its worst droughts in decades. The drought has hit Arabica-growing regions hard and limited yields.
The 2023-24 harvest cycle has already seen a sharp drop in production, and some estimates suggest that production could fall by a fifth (20%).
The impact is being felt most in Minas Gerais, Brazil’s largest coffee-producing state and home of premium Arabica, with entire months of below-average rainfall.
While Brazil dominates the Arabica market, Vietnam is the world’s top producer of Robusta, a cheaper bean used in instant coffee. Earlier this month, the country’s main coffee-growing regions were decimated by Typhoon Yagi, which killed about 60 people and injured several hundred.
According to initial estimates, thousands of hectares of coffee plantations have been affected, leading to significant losses, including in the long term, as damaged trees will take years to recover.
Prices at their highest in 10 years
The combined effects of drought in Brazil and typhoon in Vietnam have caused a sharp rise in global coffee prices. The International Coffee Organization (ICO), the intergovernmental body of coffee exporting and importing countries, reported that prices jumped nearly 20% in the third quarter of 2024, reaching their highest level in nearly a decade.
“A rapid recovery for this sector is not possible,” says Katharina Erfort of international supply chain management company Inverto. “The coffee sector is unlikely to recover quickly, even if supply improves. The sector remains vulnerable to extreme weather conditions that could continue to disrupt future harvests. Furthermore, increasing global demand, particularly in emerging markets such as Asia, could continue to put pressure on prices, further slowing recovery efforts.”
Arabica futures, traded on the Intercontinental Exchange (ICE), have seen a spectacular rise. Prices are now above $2.50 (€2.25) per pound, up from $1.80 (€1.62) at the beginning of the year. Robusta prices have followed a similar trajectory, rising by about 25% to more than $2,000 (€1,796) per metric ton.
The sharp price increases have sent shockwaves through the global coffee market. Traders are facing increased volatility as the threat of further weather-related disruptions, as well as the cost of rebuilding in the event of such disruptions, also tend to push prices higher.
A blow to European consumers
The effects of rising costs are particularly pronounced in Europe.
In Germany, retail prices for ground and whole bean coffee have increased by an average of 10% since 2022, according to Statista.
A survey by the Brussels-based European Coffee Federation (ECF) found that the price of almost 65% of coffees in Europe had jumped by between 5% and 15% since the start of 2023.
As the world’s two largest coffee producers struggle to recover from their respective crises, the outlook for the global coffee market remains uncertain.
Climate change is reducing the availability of land suitable for growing coffee, and extreme weather events are increasing, creating many challenges for the sector.
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