- Arabica hit $3.26 per pound, a 47-year high, fuelled by global supply fears
- Coffee prices surged 70% this year, shaking supply chains and consumer wallets
- Producers could gain power, but rising costs and volatility are testing the coffee industry at large
COFFEE prices have surged to their highest levels since April 1977, driven by fears over supply disruptions in top-producing nations like Brazil and Vietnam, and the anticipation of the EU Deforestation Directive (EUDR).
While headlines indicate the coffee world is in shock, hasn’t it been a long time coming?
In 2023, Algrano shared its “big short” theory that compares today’s coffee trading “crisis” to the 2008 financial crisis where “consolidation was just the result of a worldwide financial crisis in which we ended up because of unchecked speculation.”
It posits that consolidation in coffee trading is just the result of another crisis, and that unlike the financial industry, “there are no regulations, and no ‘too big to fail laws.’”
Arabica futures climbed to $3.26 per pound, marking a 70% rise this year. This remarkable rally has rippled through the global supply chain, raising costs for roasters, retailers, and consumers.
“In just three weeks, coffee prices have surged dramatically, creating major challenges for the supply chain,” says Albert Scalla, Senior Vice President of Trading at Stonex. “Traders, who often hold coffee inventory and hedge against price changes using futures contracts, are now facing significant financial pressures. To maintain these ‘hedged’ positions as prices rise, they must deposit additional funds as collateral, known as ‘margin calls.’”
“For example, holding 10 futures contracts, which represent around 2,840 bags of coffee, would require $322,500 in extra funds just to cover the recent price increases. For larger traders managing 1,000 futures contracts, this would mean an eye-watering $32.3 million in additional collateral. And that’s on top of the initial deposit required, which has now increased to $8,100 per contract – amounting to $81,000 for 10 contracts or $8.1 million for 1,000 contracts.
This rapid price hike has put immense strain on traders and the broader supply chain, forcing them to navigate these financial hurdles while ensuring coffee still reaches buyers.”
Looking at the broader context, the price hike stems largely from weather woes. Brazil, the world’s largest coffee producer, faced a prolonged drought and heatwave that damaged coffee trees, reducing output for the coming season.
Although recent rains brought an “excellent flowering,” concerns linger about whether the flowers will convert into cherries. Vietnam, the top robusta producer, has also grappled with challenging conditions, exacerbating the supply crunch.
The move has also partly been driven by coffee roasters aiming to secure supplies ahead of likely shortages and uncertainty over the status of the EUDR.
With European roasters rushing to build their inventories for next year, “US roasters have come into the market too to make sure they do not get priced out,” according to the Financial Times, that posits that they could also be reacting to president-elect Donald Trump’s promise to impose import tariffs on a range of goods once he takes office in January.
“One major concern is the lack of long-term price management by both producers and roasters, a trend that has worsened over the past five years,” says Albert.
“Since the pandemic and the onset of ENSO weather events, agricultural commodities, including coffee and cocoa, have experienced massive price swings. This volatility has made it harder for stakeholders to plan effectively, leaving the market increasingly reactive and vulnerable.”
Compounding these issues, strong exports earlier in the year have left stockpiles dangerously low. The USDA estimates Brazil’s coffee reserves are 65% lower compared to the previous estimate, and 26.4% below last season for 2024-2025.
As supply tightens, the impacts are being felt downstream, with roasters scrapping discounts and preparing for higher consumer prices.
“The market responds to fundamentals, often amplified by a frenzy,” says Thiago Marques Cazarini, Owner of Cazarini Trading Company.
“Ultimately, it’s about balancing supply and demand. Coffee prices rarely stay this high for long. While consumers feel the pinch, producers can benefit, using profits to invest in crops. The challenge now is stabilising the market and rebuilding global coffee stocks.”
The response to a “slow-boil” crisis is a complex one
The sharp price increase has reignited debates around coffee’s value and sustainability.
For years, industry stakeholders like the Specialty Coffee Association (SCA) have warned of a “price crisis” in coffee. Since 2019, the SCA’s Price Crisis Response Initiative has sought to address the disparity between producer costs and market prices.
Now that that prices finally are up, it remains to be seen how the industry – and long-term advocates for higher prices – will react when faced with challenging supply chain-wide realities.
“One thing we can promise, as we have been warning these last couple of months, is that extreme volatility is here to stay and will have to be dealt with for the next several months,” says Albert.
“Historically, when we enter these price levels, volatility and price fluctuations multiply severely. The challenge for the entire supply chain, from producers to consumers, will be to adjust and deal with this new volatility. Weather concerns, EUDR uncertainties, and consumption patterns will bring much to the deciphering table.”
As the price rises, many are celebrating this as a win for coffee producers – viewing it as breaking from business as usual and getting them the value they deserve, a price better aligned with the work that goes into coffee production.
While high prices might seem like a victory for farmers, the reality is more complex. While $3 per pound or more appears lucrative, rising costs of labour, fertiliser, and inflation mean producers’ margins still remain tight.
This cyclical boom in coffee prices contrasts starkly with years of low returns that left many farmers struggling to sustain their operations, with some studies showing how price volatility also harms their mental health.
The current rally has also sparked friction between producers and buyers. With the balance of power shifting, some farmers are declining traditional long-term contracts, choosing instead to sell to the highest bidder.
Roasters who previously prided themselves on supporting farmers through lean years are now questioning the fairness of being undercut. This tension exposes long-standing disparities in how coffee’s value is distributed across the supply chain.
“I’m not deeply involved in specialty coffee trading, but it’s clear that this sector caters to a specific niche, which is now facing economic challenges,” says Thiago.
“Consumers in this niche may hesitate to commit to paying unusually high prices for premium coffee. If they opt out, alongside commercial-quality coffee consumers – such as everyday workers and households – the idea of price sustainability becomes little more than an unrealistic ideal.”
The concept of a “price crisis” itself is increasingly under scrutiny. Labels like “crisis” and “high prices” are often framed by industry players in positions of power, raising questions about whether these narratives are designed to preserve the status quo.
As prices rise, the SCA and others advocating for sustainable pricing face the challenge of ensuring long-term solutions rather than temporary windfalls.
Real progress goes beyond higher payments – it requires understanding farmers’ realities, fostering equity, and building sustainable practices. Change will come from direct engagement, shared responsibility, and long-term action to empower the most vulnerable producers.
Impacts across the value chain
The coffee value chain, from farmers to consumers, is experiencing profound shifts. For producers, higher prices offer a rare opportunity to improve incomes, albeit tempered by rising costs.
Many are reinvesting in their farms, while others are adopting a more cautious approach, aware that coffee’s price volatility could reverse gains quickly.
Exporters and traders are also navigating uncharted waters. Some are seeing unprecedented profits, while others face logistical hurdles as buyers become more selective.
Roasters, particularly small specialty brands, are squeezed as the cost of green coffee eats into already tight margins. Larger multinational players may weather the storm better, leveraging economies of scale and diversified portfolios to maintain profitability.
“For roasters who haven’t hedged their future coffee purchases, this surge in prices represents an immediate cost increase,” explains Albert. “Most roasters operate with a relatively short-term price lock-in, so these sharp rises will either reduce their profit margins or force price hikes at the retail level in the near future. This will likely lead to inflation in retail coffee prices.”
“On the bright side, producers are benefiting significantly from this historic price surge, which has only been seen twice before. However, it’s crucial for coffee producers to approach this cautiously. While the higher prices provide an opportunity to improve incomes, they also carry risks. Producers need strategies to secure current gains while staying prepared in case prices rise further or volatility returns.”
Consumers are beginning to feel the pinch, too. Higher costs at cafés and supermarkets could lead to shifts in consumption habits, such as fewer out-of-home coffee purchases or a move toward lower-cost options like soluble coffee. Conversely, the focus on coffee’s rising value may encourage consumers to appreciate its true cost, fostering greater transparency and accountability across the industry.
The power dynamics in the industry are also evolving. Producers, traditionally at the mercy of buyers, now have greater leverage. Many are prioritising buyers who align with their values or offer better terms, rejecting traditional models that demand costly certifications or other conditions.
“There’s a limit to everything – prices don’t rise forever, and they don’t fall forever either,” says Thiago. “The buyer-seller relationship has evolved significantly over the past decade, especially since the pandemic. As always, there are forces in the market driven purely by self-interest and one-sided outcomes. However, in my view, there are more well-intentioned companies than bad actors.”
“Producers have an opportunity to better understand the dynamics of the market, while buyers need to pay closer attention to what producers have to say. Building a closer, more collaborative relationship between the two sides can only lead to positive, long-term outcomes for everyone involved.”
This recalibration could lead to more equitable relationships, but it also risks alienating long-standing partners.
As the industry grapples with these changes, the long-term implications are uncertain. Will high prices incentivise innovation and sustainability, or will they widen inequalities within the supply chain?
For the SCA and other advocates of coffee’s value, the challenge lies in translating this moment of opportunity into lasting improvements for all stakeholders.
From café owners to farmers, everyone has a stake in how the coffee sector evolves. High prices may be temporary, but they highlight the urgent need for structural reforms that ensure fair compensation and sustainable practices.
Coffee Intelligence
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