LONDON: International coffee prices have increased to their highest in nearly 50 years due to poor weather in Brazil and Vietnam, forcing roasters to increase prices and consumers to hunt for cheaper drinks amid the cost-of-living crisis.
What Drives Prices?
Reuters news agency reported that production issues linked to bad weather in Brazil and Vietnam have seen international supplies lagging demand for three years. That has left stocks tired and driven benchmark ICE exchange prices to a peak of $3.36 per lb.
The last time coffee traded that high was in 1977 when snow destroyed strips of plantations in Brazil.
Who are the main producers of Coffee?
Brazil, which produces around half the world’s arabica – high-end beans used mainly in roast and ground blends – experienced one of its worst famines on record this year.
Although rains arrived in October, soil moisture also remains low and experts believe the trees are producing too many leaves and too few of the plants that turn into cherries.
READ ALSO: Mystery, Volatility, Trump: The Bitcoin Phenomenon
Vietnam produces about 40% of the robusta beans typically used to make instant coffee, however, the country also faced a severe famine earlier this year, which was followed by excess rains since October.
Consultancy StoneX forecasts Brazil’s arabica output dropping 10.5% to 40 million bags in the upcoming year, offset somewhat by higher robusta output, thus decreasing the country’s overall crop by 0.5%, Reuter news agency reported.
The crop could also shrink up to 10% in the year by the end of September 2025 in Vietnam.
Impact on roasters and consumers
Skyrocketing coffee prices are a major problem for roasters. Reuters and many other media reported that the head of the world’s biggest coffee company was dismissed earlier this year following the board grew unhappy regarding weak sales and a loss of market share due to price increases, which prompted customers to switch to less expensive brands.
Roasters tend to buy coffee several months in advance, which suggests consumers will expect to see the price hike in 6 to 12 months.
