Coffee prices have been steadily climbing this year. On 14 November 2024 – shortly after the EU voted to delay its deforestation regulation – the C price jumped to a 13-year high.
A week later, as uncertainty about the EUDR postponement prevailed and the USDA lowered its estimates for Brazil’s 2025/26 production, arabica futures shot up to US $3.2/lb – the highest level in 27 years. Prices at this level have only been seen in 1977, 1997, and 2011 and are not expected to drop any time soon.
Many interconnected, complex factors are contributing to the highest C price we have seen in almost three decades. Supply shortages in Brazil and Vietnam, a strong US dollar against the Brazilian real, and rising shipping costs are all pushing up market prices. The USDA will reportedly lower its estimates for the 2024/25 global surplus, meaning this sustained period of market volatility is likely to continue.
The implications of a high C price on coffee quality and availability are huge. Traders and roasters both need to adapt and strike a balance between costs and quality, while producers are likely to shift farming practices to capitalise on high prices.
To learn more, I spoke to Emmanuel Dias, Vice President of European Trading at Swiss Water Decaf, and Russ Prefontaine, president and co-owner of Fratello Coffee Roasters.
You may also like our article on whether buying in cherry will become more acceptable while coffee prices are high.
Since the dissolution of the International Coffee Agreement in 1989, coffee prices have followed a pattern of low valleys and short peaks. This year alone, the C price has increased by a staggering 70% and reached its highest level since 1977, when a black frost devastated over 70% of Brazil’s coffee harvest.
Significant price spikes in 2024 are also related to unfavourable weather conditions. A severe drought in Brazil earlier this year worsened supply concerns, while periods of prolonged dryness and heavy rains in Vietnam impacted the country’s output. The two countries are the world’s two biggest producers of coffee, and therefore have a huge influence on the market.
But there are many other factors at play that are driving up the C price.
“Uncertainty about the EUDR has exacerbated market volatility,” says Emmanuel Dias, Vice President of European Trading at Swiss Water Decaf. Originally scheduled for rollout in December 2024, the EU parliament voted to delay the landmark deforestation regulation by one year to grant companies and operators more time to comply. Both the EU parliament and council need to agree to the postponement, and uncertainty about whether the delay will be approved has placed many traders and producers in a grey area, especially those which were well prepared for the new regulation.
Looking ahead, there are no signs that coffee prices will fall significantly in early 2025.
“Dwindling stocks in consuming countries, rising export levels, and lower production volumes are other compounding factors,” Emmanuel says. “According to the International Coffee Organisation, global exports were around 135 million 60kg bags this year – an increase of 11% on the previous year.”
Depleted stocks and a lower arabica output in Brazil will continue to leave a substantial gap in global coffee supply. Moreover, the country’s monthly exports reached a record high in October 2024.
Shipping costs and transit times are also playing a huge role in market volatility. Conflict and geopolitical tension in the Middle East have forced carriers to reroute, extending shipping times and adding on extra costs.
“Let’s say we need to export 120 million bags in a year to meet demand, so an average of 10 million bags per month,” Emmanuel explains. “An increase in transit time of four weeks or more means we would need to export an additional 10 million bags to maintain and replace stocks at destination. But despite increasing export volumes, stocks in consuming markets aren’t building.
“What’s more, importers aren’t incentivised to carry more stock because of high interest rates and the inverted switch,” he adds.
In the wake of a turbulent year ahead for the coffee industry, roasters will need to be even more prepared than ever before. Already balancing tight margins, many are grappling with rising business costs and inflation, forcing them to be more strategic with their buying practices and menu prices, including offering cost-effective blends.
“One of the most effective strategies we’ve adopted is enhancing transparency with our customers regarding the factors driving these cost increases,” says Russ Prefontaine, president and co-owner of Fratello Coffee Roasters. “By openly communicating about our cost structures – including the escalating prices of green coffee, shipping expenses, and operational costs – we help our clients understand that these changes are largely beyond our control.
“We’ve found that this level of transparency fosters trust and aligns us with our customers. While it’s possible to overwhelm clients with too much information, we’ve learned to balance detail with clarity to avoid confusion. This open dialogue demonstrates that any price adjustments are necessary to maintain a sustainable and profitable operation, rather than simply increasing margins.”
Periods of high market prices pose particular challenges for the specialty coffee industry. To take advantage of high prices that exceed the costs of production, producers are less incentivised to prioritise quality and opt for less intensive farming practices.
“There is a risk that producers will start growing less specialty-grade coffee to capitalise on a high C price,” Emmanuel says. “But the question is whether the premium paid for specialty coffee is high enough to cover production and processing costs. If yes, they will still grow specialty coffee. If not, producers will request higher premiums, changing the dynamic of coffee trade as they become price makers, not takers.”
On the other end of the supply chain, consumer behaviour may change as people respond and adapt to higher prices.
“I don’t think demand for specialty coffee will decline, however, we may observe a shift in consumer habits,” Russ tells me. “Similar to trends during the pandemic, more people might choose to consume coffee at home rather than in cafés. While the appreciation for specialty coffee remains strong, the context in which it’s enjoyed could change.”
For roasters, this could mean shifting their focus onto ecommerce and subscription offerings to better manage margins.
“I believe the market is shifting toward a new pricing structure that may become the norm. The higher pricing levels we’re seeing are crucial for achieving true sustainability for coffee farming communities, ensuring that producers receive fair compensation for their labour and resources,” Russ says. “The challenge for us as an industry is to adapt quickly enough to ensure the entire value chain remains profitable. This requires re-evaluating our pricing strategies, improving operational efficiencies, and continuing to educate consumers about the real value of coffee and the complexities of the global market.”
A complex interplay of market conditions is driving up the C price – and it’s unlikely to fall going into 2025. Roasters will need to be more strategic than ever, and increased transparency with customers is likely to work in their favour.
Next year is shaping up to be a turbulent time for the coffee industry with much uncertainty expected. But as record market prices trickle down to consumers, roasters can take the opportunity to explain why. In turn, consumers’ perceived value of coffee could increase – and they may be willing to pay more in the long term.
Enjoyed this? Then read our article on why market volatility means roasters need to be strategic with prices.
Perfect Daily Grind
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