Coffee prices soar to a 27-year high on supply fears

Price chart of coffee USd/Lbs in a period of 5 years

Coffee futures in New York surged to their highest levels since 1997, driven by concerns over crop production in leading growing regions, which could further elevate costs for both roasters and consumers.

Arabica coffee, prized for its use in specialty brews, climbed as much as 3% on Monday. This increase is part of a broader trend this year, with coffee prices skyrocketing due to severe supply challenges in major producing countries like Brazil and Vietnam. The robusta variety, commonly used in instant coffee, recently reached its highest prices since the 1970s.

A cup of coffee with Arabica coffee beans around it

Drought conditions in Brazil, a key coffee producer, have sparked fears of reduced output for the next growing season. Rabobank analyst Guilherme Morya noted that the prolonged dry and hot weather through September has significantly impacted arabica coffee crops. While rains in October prompted an “excellent flowering” of coffee trees, there is concern that these flowers may fail to develop into cherries, jeopardizing the harvest.

Compounding the issue is the brisk pace of arabica exports this year, which could lead to historically low stockpiles. The U.S. Department of Agriculture estimates Brazil's coffee inventory may drop to 1.2 million bags by June, down 26% from last year.

A cafe full of patrons

This coffee price surge underscores ongoing pressures on agricultural goods, even as broader wholesale food costs have retreated from their peak in early 2022. Across the supply chain, sellers have been raising prices and cutting back on discounts to maintain profit margins, with further increases anticipated.

As of 10:23 a.m. in New York, arabica futures were up 2.4%, reaching $3.0935 per pound—a 64% increase this year.