Coffee prices on the boil as natural disasters decimate crops

Droughts in Brazil, the world’s largest coffee producer, and severe typhoons in Vietnam, the second-largest, have significantly disrupted global coffee supply chains, driving up production costs that are bubbling their way through to consumers.  

As one of the world’s largest coffee-drinking regions, Europe’s coffee lovers will find price hikes particularly hard to swallow. Europeans consume approximately 3.2 million metric tons of coffee a year, accounting for almost 33% of the world’s total coffee consumption, according to German consumer data company Statista.

Natural disasters have wreaked havoc

Brazil, responsible for around 40% of the world’s coffee production, has been grappling with one of its worst droughts in decades. The dry conditions have severely affected its arabica coffee-growing regions and reduced yields.

The 2023-2024 crop cycle has already seen a steep drop in production, some estimates suggest output could fall by as much as one-fifth (20%). 

The impact is being felt most acutely in Minas Gerais, Brazil’s largest coffee-producing state and the home of the high quality arabica bean, which has experienced months of below-average rainfall.

While Brazil dominates the arabica market, Vietnam is the world’s leading producer of the cheaper robusta bean – used in instant coffee. Earlier this month, the country’s key coffee-growing regions in the Central Highlands were decimated by Typhoon Yagi, which killed at least 60 people and left hundreds injured. 

Early assessments suggest thousands of hectares of coffee plantations were affected, with significant losses to both the current harvest and future production potential, as damaged trees will take years to recover. 

Perfect storm of challenges drive prices to a 10-year high

The combined effects of Brazil’s drought and Vietnam’s typhoon have triggered a sharp increase in global coffee prices. The International Coffee Organization (ICO), the intergovernmental body made up of coffee exporting and importing countries, reported that prices surged by nearly 20% in the third quarter of 2024, reaching their highest levels in almost a decade. 

Katharina Erfort, from international supply chain management company Inverto is gloomy about the prospect of a return to normal prices any time soon. Speaking to Euronews Business she said: “A quick recovery for the coffee sector is unlikely, even with potential improvements in supply. 

“The ongoing effects of climate change make a swift return to stability difficult. The sector remains vulnerable to extreme weather patterns that can continue to disrupt future harvests. Additionally, rising global demand, particularly in emerging markets like Asia, may continue to put upward pressure on prices, further slowing recovery efforts.”

Arabica coffee futures, traded on the Intercontinental Exchange (ICE), have risen dramatically, with prices now hovering above $2.50 (€2.25) per pound – up from $1.80 (€1.62) earlier in the year. Robusta prices have followed a similar trajectory, climbing by around 25% to reach more than $2,000 (€1,796) per metric ton.

The sharp price increases have sent shockwaves through the global coffee market. Coffee traders are facing heightened volatility, with concerns growing that continued weather-related disruptions and the cost of rebuilding after the natural disasters could push prices even higher. 

Agri-commodities analyst at Rabobank, Carlos Mera told Bloomberg that this crisis is compounded by logistical challenges, such as port congestion and a global shortage of shipping containers, which are hampering the movement of coffee worldwide.

Europe’s love affair with coffee is being tested

The effects of rising costs are particularly pronounced in Europe. In Germany, Europe’s largest coffee market, retail prices for ground coffee and coffee beans have risen by an average of 10% since 2022, according to Statista.

A survey by the Brussels based European Coffee Federation (ECF) found that nearly 65% of cafes in Europe have raised their prices by between 5% and 15% since the start of 2023. Researchers noted that increases were likely to be driven by a range of factors beyond the cost of coffee beans, as inflation had driven up the price of other essentials such as milk, sugar, and disposable cups.

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As the world’s big two 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 on which coffee crops can thrive, and extreme weather events are increasing, creating a perfect storm of challenges for the sector and Europe’s coffee lovers.