Why has the price of coffee risen dramatically?

Why has the price of coffee risen dramatically?

We are all about to discover that our coffees are costing us more, and the price rises could be significant.

Coffee beans cost more right now than at any time in the last 50 years. The price of arabica beans on the commodity markets rose to $3.60 in January. At the time of writing, that price has reached $4. It has doubled over the last year, but why?

Climate change and coffee

Recent increases in coffee prices have largely been caused by the impact of damaging weather patterns fuelled by climate change. Average temperatures around the world are rising and precipitation patterns are changing. All of which means that some regions are experiencing extreme flooding events while others are enduring lengthening periods of drought. Some get hit by both extremes.

Indeed, Brazil has been dealing with its most severe drought in 70 years which has resulted in water shortages and crop failures. Vietnam has experienced drought followed by flooding. These two countries produce more than half of the world’s coffee supplies.  The situation is also challenging across South America and Africa.

To make matters worse, farming methods have diminished soil quality and left land less able to cope with severe weather.

In addition to decimating crops, drought conditions provide the perfect environment for wildfires that destroy everything in their paths.

Unfortunately, the arabica coffee bean is extremely vulnerable to the weather events delivered by climate change.

In short, coffee prices are rising because fewer beans are coming to market.

With extreme weather events becoming ever more common, the situation could become much worse in the coming years.

What about the cost of our cuppas?

It is inevitable that the increased cost of arabica beans will eventually impact consumers. The cost of beans will be at least partly reflected in the retail prices of those beans together with ground coffee and coffee drinks. Retail prices have already risen at rates higher than inflation in recent months.

Of course, higher coffee prices do enable producers to invest more in climate change mitigation measures which could help to ease the situation. But those measures won’t deliver overnight improvements to yields.

Will the price of instant coffee also rise?

Arabica beans are used for drip coffee and robusta beans for instant coffee. Robusta beans are cheaper, and their production is not so seriously troubled by extreme weather. For these reasons, the price of instant coffee may not rise significantly.

Could Donald Trump spark further price rises?

Donald Trump’s actions could contribute to rises in coffee prices. In January 2025, he threatened to impose a 25% import tariff on Colombian goods. This was an attempt to force the country into accepting refugees and deportees from the United States. Import tariffs would not affect the costs of the coffee producers. But they would result in consumers paying more for any coffee products that have been imported from Colombia or anywhere else that Trump decides to hit with higher tariffs.

What about supply chain issues?

Once produced and purchased, coffee must be shipped to its final destination. There are ongoing geopolitical issues that importers are contending with including rising shipping costs. Those rises have been caused by increased labour costs, congestion at ports and industrial action.

All aspects of producing and transporting coffee have become more expensive and rising prices will inevitably filter down to consumers.

It could be that a cup of coffee is about to become much more expensive and that is really bad news.