Bill Harris, 2/13/2025
Green coffee prices have surged to unprecedented levels, climbing more than 100% over the past year, with a striking 25% increase in early 2025 alone. Three critical factors have driven this dramatic rise:
- Weather Disruptions in Major Growing Regions – Brazil and Vietnam, which together produce over 50% of the world’s coffee, have faced severe weather challenges. Vietnam endured a devastating cycle of prolonged drought followed by severe flooding. Meanwhile, Brazil is grappling with its worst drought in 70 years. Production capacity has been severely impacted by these climate challenges.
- Speculative Market Forces – As prices began rising last year, speculative investors began shifting substantial funds into coffee futures markets. News of Brazil’s drought intensified this trend, creating a self-reinforcing cycle of investment and price increases. Currently, coffee trades at $1.00/lb above its previous all-time high, with market analysts predicting continued elevated prices.
- Liquidity Crisis in the Supply Chain – The price surge has created significant cash flow challenges throughout the coffee supply chain. Coffee cooperatives and importers, who typically operate on a 3-6 month cycle from purchase to sale, now require double the operating capital to maintain normal inventory levels. With many unable to secure sufficient funding, they’ve reduced their purchasing and stockholding activities. This contraction in available supply has further exacerbated the price increases.
Some additional trends and challenges that we see are worth noting:
- Worldwide demand for coffee continues to rise – while the land suitable for coffee production worldwide continues to shrink due to climate change. Coffee only grows in the tropics, and the arabica variety that we buy only grows well between 4,000-6,000 feet above sea level. Too high and the plant freezes, too low and disease kills the plant. As temperatures warm, lower grown coffee succumbs to disease and farms move up the mountain – to less land and more fragile soil.
- The threat of tariffs has contributed to speculation in coffee markets and created uncertainty in supply chains. Tariff threats have also disrupted the location and balance of empty shipping containers – resulting in green coffee being stranded in growing countries.
- Growing countries like Brazil, Colombia and Indonesia, are now drinking a lot of coffee. China and India – the two most populous countries in the world – are both seeing a shift from tea to coffee consumption. For centuries coffee has been grown in the tropics as a cash crop and exported to the north. This pattern is quickly changing, creating a more competitive marketplace for all.
- Coffee farmers worldwide are getting older. The next generation on many farms do not see a future in agriculture and are migrating to the cities or more developed countries.
- Coffee plants take 3-4 years to begin producing a crop so supply surpluses and shortages and significant price volatility cannot easily be navigated year to year.
Commodity Trading Impacts Specialty Prices
This chart illustrates the significant rise over the last year – and the remarkable increase that we have seen in the last six weeks. The C 425.10 (y axis) means that the international market price, on which most coffee prices are based, “closed” on 2/13/25 at $4.25/lb. A specialty coffee contract then adds a specialty premium, organic premium and hopefully a fair trade premium – which when totaled adds from $.70 – $1.25 to this market price illustrated below. So for the upcoming season, we expect to be paying farmer cooperatives over $5.00 per pound before it ever leaves the growing country. Then we have to cover the costs of importing and shipping it to the US, warehousing it for up to a year, then losing 20-25% of the weight when we roast it. This is going to be a challenging year!
Negative Effects On Farmers and Their Co-ops
We are very concerned about the exporting cooperatives, our trading partners, surviving incredibly volatile market conditions as they try to pay farmers fairly and keep these direct supply chains that we have all worked so hard to build in place. Our goal all along has been to offer farmers a fair price for coffee so they can earn a living wage and provide for their family. In 2025, “the market” has stepped in and all of the sudden is offering very good prices to farmers. Instead of the farmer getting squeezed, the next level up – their exporting cooperative – is under intense pressure this year. The exporting coop will need to pay farmers competitive prices and all buyers that do not believe in deep partnerships and long term will be negotiating harder and willing to change alliances in the name of pricing.
NBC News-A global coffee price spike is about to drip into your mug