Coffee price surges to highest on record

Coffee lovers around the world may soon find themselves paying more for their favorite morning beverage. On August 30, 2022, the price of Arabica coffee beans, which are the most widely produced type of coffee, reached an all-time high of $3. 44 per pound. This represents a staggering increase of over 80% in just one year. Meanwhile, the price of Robusta coffee beans also hit a new peak in September. The surge in coffee prices is largely attributed to adverse weather conditions affecting the two largest coffee-producing countries, Brazil and Vietnam. As the popularity of coffee continues to rise globally, traders are anticipating a decline in crop yields. According to industry experts, many coffee brands are contemplating raising their prices in the upcoming year. In recent years, major coffee roasters have managed to absorb rising costs without passing them on to consumers, but this trend appears to be changing. Vinh Nguyen, the CEO of Tuan Loc Commodities, stated, 'Brands like JDE Peet, which owns the Douwe Egberts brand, and Nestlé have previously absorbed the higher raw material costs themselves. However, they are now nearing a tipping point, and many are considering price increases in supermarkets in the first quarter of 2025. ' Italian coffee giant Lavazza has also expressed its commitment to maintaining market share without transferring higher costs to customers. However, the soaring prices of coffee have ultimately compelled the company to adjust its pricing strategy. 'Quality is paramount for us and has always been the cornerstone of our contract of trust with consumers,' Lavazza stated. 'This means we must continue to tackle very high costs, which has forced us to adjust our prices. ' At an investor event in November, a senior executive from Nestlé acknowledged the challenges facing the coffee industry, admitting that the company would need to modify its prices and package sizes. 'We are not immune to the price of coffee, far from it,' said David Rennie, Nestlé's head of coffee brands. The last time coffee prices reached such heights was in 1977, following unusual snowfall that devastated Brazilian plantations. Ole Hansen, head of commodity strategy at Saxo Bank, noted that concerns regarding the 2025 crop in Brazil are the primary driver of the current price surge. 'The country experienced its worst drought in 70 years during August and September, followed by heavy rains in October, raising fears that the flowering crop could fail. ' The price of coffee has been on a steady upward trajectory, and it is not only Brazilian coffee farms that have been impacted by adverse weather. Robusta supplies are also expected to decline, as plantations in Vietnam, the largest producer of that variety, have faced both drought and heavy rainfall. Coffee is the second most traded commodity in the world by volume, following crude oil, and its popularity continues to grow. For instance, coffee consumption in China has more than doubled over the past decade. Fernanda Okada, a coffee pricing analyst at S&P Global Commodity Insights, stated, 'The demand for coffee remains high, while inventories held by producers and roasters are reported to be at low levels. ' She added that the upward trend in coffee prices is expected to persist for some time.