Global coffee trade nears paralysis due to sharp rise in bean prices

The sharp rise in coffee bean prices has nearly halted global coffee trade, as suppliers have drastically reduced purchases to a minimum, Reuters reports, citing sources.

Photo: commons.wikimedia.org by Elias Shariff Falla Mardini (, https://creativecommons.org/publicdomain/zero/1.0/

Coffee

At the annual convention of the US National Coffee Association in Texas, participants were shocked by the 70% surge in arabica futures on the ICE exchange. Renan Chueyri, CEO of Ecuadorian company Elcafe, stated that for the first time, he was unable to sell the planned volume of instant coffee by March. According to him, demand has dropped as high prices limit buyers' purchasing power.

"Normally, we would have sold everything by now, but so far, we've sold less than 30% of our products. The sharp price increase is draining buyers' funds, leaving them unable to purchase the necessary volumes," Renan Chueyri, CEO of Elcafe, Ecuador said.

Market Participants Call the Situation Difficult

According to Reuters, the price hike is linked to reduced production in key regions, including Brazil. However, prices could fall by 30% by the end of the year due to weakening demand. Additionally, a strong harvest in Brazil is expected, which could stabilize the situation.

Despite this, the current market remains challenging. A senior executive from a US coffee roasting company told Reuters that his partners are unsure about their business future.

"They don’t know if they’ll be able to sell their products at the new prices. Some of them are going bankrupt," he said.

As a result, a number of US retail stores are experiencing coffee shortages. Coffee storage warehouses near US ports are only half full, and some companies have already canceled warehouse leases.

However, commodity trader Louis Dreyfus believes prices may eventually decline due to expanded coffee plantations in India, Uganda, Ethiopia, and Brazil. Combined with the expected abundant Brazilian harvest, this could lead to a significant price drop.

Coffee and Cocoa Prices Hit Record Highs

Prices for both major coffee varieties – arabica and robusta – have reached multi-year highs. Arabica has soared to levels last seen in 1997, while robusta has hit record prices not seen since the 1970s.

In late November, arabica futures for March delivery reached $3.22 per pound, the highest since May 1997. At one point, the price spiked to $3.178 per pound, equivalent to $7,006 per ton, marking a 2.75% increase from the previous trading session. The primary driver behind this surge is concern over Brazil’s harvest, which has suffered its worst drought since 1981, according to the meteorological service Cemaden.

Meanwhile, the US Department of Agriculture has forecast Brazil's 2024–2025 coffee harvest at 66.4 million 60-kg bags, down from the previous estimate of 69.9 million bags. By the end of the agricultural year, stockpiles may fall to just 1.2 million bags—26% lower than the previous period. Costa Rica has also suffered losses, with heavy rains destroying about 15% of its arabica crop.

As a result, since the beginning of 2024, arabica prices in the US have jumped 70%, while robusta prices in the UK have surged by 85%. The January futures price for robusta rose 2.73%, reaching $5,299 per ton. Traditionally, robusta has been half the price of arabica, but the situation has now changed.

At the same time, cocoa prices continue to climb, surpassing $12,000 per ton for the first time. Between November and December alone, cocoa prices surged nearly 30%. A shortage is expected despite increased shipments, as harvests have been impacted by weather conditions and plant diseases.

According to Capital Economics economist David Oxley, coffee prices may remain high for several years rather than just months. A decline is only expected once production recovers and stockpiles increase.

Details

Coffea arabica  also known as the Arabica coffee, is a species of flowering plant in the coffee and madder family Rubiaceae. It is believed to be the first species of coffee to have been cultivated and is the dominant cultivar, representing about 60% of global production. Coffee produced from the more acidic, more bitter, and more highly caffeinated robusta bean (C. canephora) makes up most of the remaining coffee production. The natural populations of Coffea arabica are restricted to the forests of South Ethiopia and Yemen.

Coffea canephora (especially C. canephora var. robusta, so predominantly cultivated that it is often simply termed Coffea robusta, or commonly robusta coffee) is a species of coffee plant that has its origins in central and western sub-Saharan Africa. It is a species of flowering plant in the family Rubiaceae. Though widely known as Coffea robusta, the plant is scientifically identified as Coffea canephora, which has two main varieties, robusta and nganda. Coffea robusta represents between 40% and 45% of global coffee production, with Coffea arabica constituting most of the remainder. There are several differences between the composition of coffee beans from C. arabica and C. robusta. Beans from C. robusta tend to have lower acidity, more bitterness, and a more woody and less fruity flavor compared to C. arabica beans. Most of it is used for instant coffee.