Arabica coffee prices soared to the highest level since 1977 on fears of supply problems. Abnormal drought in Brazil may lead to a drop in coffee production next season.
March arabica coffee bean futures rose 3.93% to a high of $3.21 per pound ($7.05 per kilogram) on November 27. This is the highest value since April 1977.
January futures for Robusta coffee on the ICE exchange rose 2.96% to a high of $5328 per tonne. The more budget-friendly variety, used in instant drinks, has also risen sharply in price this year, by about 85 per cent.
Arabica coffee prices have risen about 70 per cent this year due to shortage fears. A severe drought earlier this year in Brazil, which is one of the world’s biggest suppliers of the variety, has heightened fears about the country’s next coffee crop. Between May and August, some key agricultural areas of the country faced the driest weather since 1981. This is dampening prospects for Brazil’s arabica crop next season.
All of this is juxtaposed with concerns over the supply of coffee beans from Vietnam, after a key coffee-growing region was hit by drought during the growing season for coffee trees and heavy rains at the start of the Vietnamese harvest.
In total, coffee is grown by about 40 countries. Just two countries, Brazil and Vietnam, account for more than half of global production.
Concerns about Brazil’s coffee production
Rabobank analyst Carlos Mera said the rise in coffee bean prices was due to a number of challenging circumstances, including concerns about Brazil’s coffee production for the 2025-2026 season, as well as delivery and logistics issues. According to a preliminary estimate by financial data provider StoneX, Brazil’s annual arabica production in the 2025-2026 season is expected to fall 11 per cent from the previous season.
According to Carlos Mera, another factor in the price increase is the uncertainty surrounding the effective date of the European Union’s European Union deforestation rules (EUDR). The new rules were originally scheduled to be introduced by the end of 2024. Suppliers will be required to provide evidence that their supply chains are not linked to land that has been deforested after 2020. The European Commission has proposed to postpone the introduction of the new rules for a year.
In addition, the market was influenced by fears of possible trade duties under the administration of US President-elect Donald Trump. In the run-up to the US presidential election, he mentioned the possibility of introducing tariffs of 10% or 20% for both hostile and friendly countries.
Analysts at coffee trader Sucafina SA said increased hedging costs due to higher requirements to post additional guarantees and the likelihood of defaults by coffee producers have caused panic buying of coffee recently.
