Adverse climatic conditions drive coffee prices to highest level in years

• New FAO study notes a nearly 40% price surge in 2024 due to supply-side disruptions, primarily from unfavourable weather
• Global coffee production amounts to over $ 20 b annually
• Value of total coffee trade estimated at over $ 25 b per year
• Global coffee industry generates over $ 200 b in annual revenues

Rome: World coffee prices reached a multi-year high in 2024 – increasing 38.8% on the previous year’s average – mostly driven by inclement weather affecting key producing countries, the Food and Agriculture Organisation of the United Nations (FAO) said.

According to an FAO note on global coffee market trends, in December 2024, Arabica, the higher quality coffee favoured in the roast and ground coffee market, was selling at 58% up on a year ago, while Robusta, used mainly for instant coffee and blending, saw a price surge of 70% in real terms.

This marked a narrowing of the price differential between the two varieties for the first time since the mid-1990s.

Rises in 2025 possible

The FAO said that coffee export prices may rise further in 2025 if major growing regions experience further significant supply reductions.

Key factors behind the recent price increase include limited export quantities from Vietnam, reduced output in Indonesia, and adverse weather impacting coffee production in Brazil.

In Vietnam, prolonged dry weather caused a 20% drop in coffee production in 2023/24, with exports falling by 10% for the second consecutive year. Similarly, in Indonesia, coffee production in 2023/24 declined by 16.5% year-on-year on the back of excessive rain in April-May 2023 that damaged coffee cherries. Exports dropped by 23%.

In Brazil, dry and hot weather conditions prompted successive downward revisions to the 2023/24 production forecast, with official estimates shifting from an anticipated 5.5% year-on-year increase to a 1.6% decline.

Shipping costs a factor

Higher shipping costs were also found to be one of the factors contributing to the increase in world coffee prices.

Early data indicates that in December 2024, the increase in world prices translated into consumers paying 6.6% more for their coffee in the United States and 3.75% more in the European Union, compared to the same period in 2023.

“The high prices should provide incentives to invest more in technology and research and development in the coffee sector – which relies largely on smallholder farmers – to increase climate resilience,” said FAO Markets and Trade Division Director Boubaker Ben-Belhassen, adding that climate change is impacting coffee production in the longer term. The FAO supports many of the coffee-producing countries to help farmers adopt climate-resilient techniques that also contribute to restoring biodiversity loss.

The FAO highlights the importance of market transparency and encourages cooperation among all actors of the value chain to support sustainable growth in the global coffee sector and protect the livelihoods of millions of smallholder producers worldwide.

Key figures

• Brazil and Vietnam together account for nearly 50% of world coffee production.
• Smallholder farmers play a vital role in the coffee industry, accounting for 80% of global coffee production.
• Global coffee production amounts to over $ 20 billion annually.
• The value of total coffee trade is estimated at over $ 25 billion per year.
• In 2023, world coffee production reached 11 million tons.
• In 2023, coffee export earnings accounted for 33.8% of total merchandise exports in Ethiopia, 22.6% in Burundi, and 15.4% in Uganda.
• In 2023, the largest coffee importers were the European Union and the United States.
• The global coffee industry generates over $ 200 billion in annual revenues.