A Record-High Surge in Coffee Prices
Global coffee futures soared to a 47-year high on Wednesday, driven by mounting concerns over supply shortages and the uncertainty of EU deforestation laws.
- Arabica coffee futures rose by 4.7%, hitting $3.23 per pound in New York – the highest since 1977.
- Robusta futures, used in instant coffee, climbed 7.7% to $5,507 per tonne, nearly double their price at the start of 2023.
Traders reported a rush among coffee roasters to secure supplies, fearing further price hikes and regulatory hurdles.
Key Drivers Behind the Price Surge
- Brazil’s Weather Woes
- Brazil, the world’s largest arabica coffee producer, has faced severe drought, the worst in 70 years, followed by heavy rains.
- The erratic weather has damaged crops, particularly for the 2025-2026 harvest, which was expected to ease global shortages.
- Robusta Supply Deficit
- Vietnam, the largest producer of robusta beans, has faced three years of poor weather, compounding the global shortfall.
- EU Deforestation Law
- New legislation banning the use of deforested land for crops has created uncertainty for coffee exporters.
- Although the EU may delay implementing the law by 12 months, the lack of clarity has prompted European importers to stockpile beans ahead of the New Year.
A Panic Among Buyers
The supply crunch has triggered a "panic mode" among buyers, according to Tomas Araujo, trading associate at StoneX.
- European roasters are purchasing earlier than usual to comply with the upcoming EU regulations.
- US roasters are also buying aggressively, partly in response to fears of import tariffs under the incoming administration.
Carlos Mera, Head of Agricultural Commodities at Rabobank, noted that 23% of global coffee exports are destined for the US, making it a critical market.
What Does This Mean for Consumers?
Consumers should brace for higher coffee prices in the coming months:
- The latest price increases haven’t yet been reflected on shelves, as previous surges are still working their way through the supply chain.
- The robusta rally earlier this year has already raised prices, and the recent arabica jump will add further strain.
“There is still much more pain coming for consumers,” warned Mera.
Looking Ahead
With supply shortages expected to persist and regulatory pressures mounting, the coffee industry faces a challenging road ahead:
- Brazil's 2025-2026 harvest may not provide the surplus needed to stabilise the market.
- Continued uncertainty over EU legislation will likely keep European buyers stockpiling, further driving up prices.
Source: (FT.com)
