Adverse weather conditions in major coffee producing nations and the strengthening of the U.S. dollar has increased the cost of coffee imports for major consuming regions, adding to upward price pressure.

Key Takeaways:

• Coffee prices globally surged in the first half of February 2025.
• Brazil: Supply concerns persist, keeping arabica prices elevated.
• Vietnam: Lower-than-expected rainfall has reduced crop yields.
• India: High temperatures and water scarcity have reduced crop yields.
• Global demand for coffee remains strong, despite rising prices.

The global coffee market witnessed a sharp increase in prices during the first half of February 2025, driven by a combination of supply-side constraints and macroeconomic factors. Poor harvests in major coffee-producing regions, exacerbated by adverse weather conditions linked to climate change, have led to reduced output, tightening global supply. The combination of these factors has fueled a bullish trend in the coffee market, with prices expected to remain elevated in the near term unless production conditions improve or demand moderates.

Coffee prices in Brazil have continued to rise in February 2025, driven by persistent supply concerns despite improving rainfall in key production regions. As the world's largest coffee producer and exporter, Brazil plays a critical role in stabilizing global supply, especially amid record-high coffee prices due to production shortfalls in several countries. However, the adverse climate scenario, marked by prolonged droughts, frost, excessive rainfall, and the severe impacts of El Niño, has caused significant damage to recent crops, particularly affecting arabica coffee production.

While January saw satisfactory rainfall across major coffee-growing areas, February has brought further precipitation, except in the Zona da Mata and Espírito Santo regions. Although these rains support grain development, they are unlikely to fully counteract the damage caused by poor flowering set in arabica plantations. Despite rising prices, demand remains strong, with no significant slowdown in coffee purchases. Given ongoing supply constraints and firm global demand, coffee prices in Brazil are expected to remain elevated in the near term.

Similarly, Vietnam, the world’s second-largest coffee producer after Brazil, has faced a challenging production scenario due to lower-than-expected rainfall, which has negatively impacted crop yields. While recent weather conditions have shown signs of improvement, the earlier drought has already taken a toll on overall output, contributing to sustained high coffee prices. Despite record-high prices, Vietnam’s coffee industry is unlikely to experience an oversupply crisis, as the availability of land for coffee cultivation remains limited. However, experts caution farmers against excessive speculation, warning that financial risks could arise if market conditions shift unexpectedly.

In the first half of February 2025, coffee prices in India have risen significantly, influenced by global supply constraints and increased input costs.  Furthermore, India's coffee production has declined due to high temperatures and water scarcity affecting crop yields. This led to a projected decrease of over 10% in exports despite record-high prices. In response to these market dynamics, other Indian consumer goods companies, such as Britannia and Nestle Industries, have also implemented price hikes to mitigate the impact of rising commodity prices on their profit margins. As stated by Managing Director Suresh Narayanan, Nestlé India is considering marginal price increases for its products to offset rising expenses in coffee, cocoa, and edible oil. The company, however, aims to keep price adjustments minimal to sustain consumer demand.

According to ChemAnalyst, coffee prices are expected to continue rising in the coming days. Market experts project that elevated prices will persist until at least July 2025, driven by a constrained global supply and sustained strong demand.