The coffee industry is currently facing a significant challenge, with prices reaching a 47-year high due to various factors affecting production and supply. Brazil and Vietnam, the two largest coffee producers, have been hit by bad weather conditions, leading to a decrease in coffee production. Brazil, which dominates the market for arabica coffee, saw a drop in production by as much as 20% in the 2023-2024 season due to extreme drought. This, in turn, resulted in a 49% year-on-year price increase, with coffee averaging $254 per bag in September.
Vietnam, the top producer of robusta coffee, also faced challenges as heavy storms impacted production. Average export prices of Vietnamese coffee rose by 60% to $3,896 per tonne in the first nine months of 2024. Additionally, supply chain challenges such as port congestion, container scarcity, and the Red Sea crisis have contributed to the rise in coffee prices. The implementation of the EUDR, although delayed for a year, poses a threat of adding bureaucracy to the supply chain and further increasing prices.
Despite these challenges, the demand for coffee continues to grow as it attracts new audiences. Coffee, which was once valued by workers and employees, has now become a mass phenomenon with the rise of coffee shop culture. China has emerged as the world leader in coffee shops, indicating a surge in coffee consumption. However, experts predict that coffee prices are unlikely to see any immediate changes.
Steve Wateridge, VP Analysis of soft commodities at Expana, highlighted that the coffee industry is currently experiencing low stock levels and volatile prices, which are expected to persist in the first six months of 2025. Weather damage to the Brazil crop over the past four years has further exacerbated the situation, with uncertainty surrounding the extent of damage to the 2025/26 crop.
While efforts are being made to expand coffee production in Brazil, the industry remains vulnerable to climate change. Climate shocks are becoming increasingly frequent, posing a significant risk to coffee production in the future. The World Coffee Research organization emphasized the importance of breeding better and more climate-resilient coffee varieties to mitigate the impact of climate change on coffee production.
The coffee industry is adapting to these challenges by exploring new areas for coffee cultivation, such as higher altitudes, and researching lesser-known coffee varieties. Global coffee breeding networks for arabica and robusta are being established to develop improved coffee varieties that ensure stable supplies from diverse origins. By investing in creating more resilient and productive coffee plants, the industry aims to secure long-term benefits for farmers, the industry, and national economies.
In conclusion, the coffee industry is facing unprecedented challenges due to a combination of factors affecting production, supply chain, and demand. Climate change poses a significant risk to coffee production, emphasizing the need for innovation and adaptation in the industry. By investing in research and development of resilient coffee varieties, the industry can overcome current challenges and ensure a sustainable future for coffee production.