Coffee prices reach record high due to bad weather

Coffee drinkers may soon see their morning breakfast getting more expensive, as the price of coffee has hit a record high on international commodity markets.

On Tuesday, the price of Arabica beans, which account for most of global production, rose above $3.44 One pound (0.45 kg), which has increased by more than 80% this year. Meanwhile, the price of robusta beans hit new highs in September.

It comes as coffee traders expect harvests to be reduced after bad weather hit the world’s two biggest producers, Brazil and Vietnam, and as the drink’s popularity continues to rise.

Coffee brands are considering raising prices in the new year, an expert told the BBC.

While in recent years major coffee roasters have been able to absorb price increases to keep customers happy and maintain market share, it looks like that’s about to change, according to Vinh Nguyen, chief executive of Vinh Nguyen Tuan Loc Commodities. .

“Brands like JDE Peet (owner of the Douwe Egberts brand), Nestle and others have (in the past) found themselves impacted by high raw material prices,” he said.

“But right now they’re almost at the tipping point. A lot of them are looking at price increases in supermarkets in (the first quarter of) 2025.”

At an event for investors in November, a top Nestle executive said the coffee industry was facing “tough times”, acknowledging that his company would have to adjust its prices and pack sizes.

“We don’t shy away from the price of coffee,” said David Rennie, head of Nestle’s coffee brands.

The previous record high for coffee was set in 1977 when unusual snowfall in Brazil destroyed plantations.

“Concerns over the 2025 crop in Brazil are the main driver,” said Ole Hansen, head of commodity strategy at Saxo Bank.

“The country experienced its worst drought in 70 years during August and September, followed by heavy rains in October, raising fears that the flower crop could be ruined.”

It is not just Brazilian coffee plantations, which produce mostly Arabica beans, that have been affected by the bad weather.

The supply of robusta is also set to dwindle after plantations in Vietnam, the largest producer of the variety, suffered both drought and heavy rainfall.

Coffee is the world’s second most traded commodity by volume after crude oil and its popularity is growing. For example, consumption in China has more than doubled in the last decade.

“Demand for the commodity remains high, while inventories held by growers and roasters are reported to be at low levels,” said Fernanda Okada, coffee pricing analyst at S&P Global Commodity Insights.

“The upward trend in coffee prices is expected to continue for some time,” he said.