Coffee Prices Reach 50-Year High Amid Supply Issues and Weather Challenges

Coffee prices have surged to their highest levels in nearly half a century due to a combination of supply disruptions, extreme weather conditions, and growing global demand, Business Insider repots.

As of Wednesday, the price of arabica coffee futures—considered the global benchmark—rose by 4.6% to $3.2305 per pound, marking the highest price since 1977. Similarly, robusta coffee futures also saw a significant increase, rising 6.9% to $5,533 per metric ton. These sharp increases, which have been building throughout 2023, are expected to lead to higher prices for coffee products worldwide.

Several factors are contributing to the rising coffee costs. One of the primary causes is the impact of adverse weather in Brazil, the world’s largest coffee producer. The country’s coffee-growing regions have faced severe drought conditions, followed by heavy rains that have created uncertainty about the upcoming harvest. Brazil produces nearly half of the world’s Arabica beans, and the weather has raised concerns about the volume of coffee that will be available for the next marketing year.

Farmers in Brazil have been reluctant to sell their beans, holding out for higher prices due to the limited supply. The situation is further complicated by similar weather issues in other major coffee-producing countries, including Colombia, Honduras, and Vietnam. In Vietnam, the world’s second-largest producer, a mix of drought and heavy rains has also resulted in lower yields, while many farmers in the region are similarly holding back their crops in anticipation of even higher prices.

The global demand for coffee has also been rising, especially for higher-end products made from Arabica beans. As coffee drinkers seek more specialized beverages, the pressure on producers has increased. However, coffee plants take several years to mature, meaning producers are struggling to keep pace with demand. This mismatch between supply and demand is further driving up prices.

For US consumers, coffee prices could rise even further, especially if tariffs proposed during the Trump administration are enacted. Although specific tariffs have yet to be applied, if the US were to impose tariffs on coffee-importing countries like Brazil, Colombia, and Vietnam, experts predict that the cost of coffee could increase by an additional 23 cents per pound. With the potential for higher tariffs, many American coffee drinkers are preparing for even steeper price hikes in the coming months.

In addition to these factors, logistical challenges are exacerbating the situation. Brazil’s coffee export industry is facing bottlenecks at its ports, further delaying shipments of beans to global markets. Meanwhile, European importers have been stockpiling coffee ahead of new legislation requiring proof that coffee was not grown on deforested land, adding to the demand pressures.