The price of coffee is set to rise as international commodity markets record the highest coffee prices ever. Coffee, the world’s second most traded commodity after crude oil, has seen its popularity grow significantly. Arabica bean prices, which lead global production, have soared above $3.44 per pound, marking a rise of more than 80% this year. Meanwhile, Robusta beans reached record highs in September. The price hikes are attributed to shrinking coffee crop expectations due to adverse weather in Brazil and Vietnam, the world’s top coffee producers, alongside rising global demand.

Brazil, the largest Arabica producer, has experienced its worst drought in 70 years, followed by heavy rains that threaten the flowering of this year’s crop. Vietnam, the leading Robusta supplier, has also faced extreme weather conditions likely to reduce yields. These supply challenges coincide with a growing appetite for coffee worldwide, particularly in countries like China, where consumption has doubled over the past decade. Roasters and traders report critically low bean inventories, exacerbating the situation.

For years, major coffee companies such as JDE Peet’s, Nestlé, and Lavazza absorbed rising raw material costs to shield consumers from price increases and maintain their competitive edge. However, this approach is becoming unsustainable as profit margins face mounting pressure. Industry insiders indicate that price hikes will likely be passed on to consumers by early 2025. Lavazza, which initially avoided raising prices, has already made adjustments, citing unavoidable circumstances. Similarly, David Rennie, head of Nestlé’s coffee brands, acknowledged the company would need to increase prices and possibly alter packaging sizes to address the financial strain, describing the situation as challenging for the entire coffee sector.

As global demand continues to rise and supply issues persist, coffee drinkers should prepare for higher costs at the checkout. The industry is navigating a complex landscape where growing consumption and constrained supply collide, leaving brands and consumers alike to grapple with the economic ripple effects.

ChemAnalyst forecasts strong coffee demand in early 2025. Increased winter consumption and limited supply from key importing countries, due to low harvests, will drive up coffee prices in 2025.