Adverse climatic conditions have caused problems in the coffee supply in Vietnam and Brazil, resulting in a 40 percent increase in international prices during 2024. A recent study by the Food and Agriculture Organization (FAO) suggests that this situation could worsen this year if major producing areas continue to experience significant reductions in production.
"The key factors behind the recent price increase include limited export quantities in Vietnam, reduced production in Indonesia, and adverse climatic conditions in Brazil," the FAO explained in its report. Additionally, higher shipping costs, which encompass everything from refrigeration equipment to fuel, also contributed to the rise in global coffee prices.
Brazil and Vietnam together represent nearly half of the world's coffee production, being the largest producers globally. On the other hand, the European Union and the United States stand out as the main consumers and import markets for coffee.
In Vietnam, prolonged drought led to a 20 percent decrease in coffee production during the 2023/24 season, with a 10 percent drop in exports for the second consecutive year. In Indonesia, excessive rainfall damaged coffee cherries, resulting in a 16.5 percent reduction in coffee production and a 23 percent decline in exports.
In Brazil, dry and warm conditions led to downward revisions of production projections for 2023/24, with an official estimate changing from a predicted increase of 5.5 percent to a decrease of 1.6 percent.
By the end of 2024, consumers in the United States paid 6.6 percent more for their coffee, while in the European Union, the increase was 3.75 percent compared to the same period in 2023. According to the FAO, a 1 percent increase in the international coffee price generates a 0.24 percent rise in the price for the final consumer in the European Union and 0.20 percent in the United States.
Arabica coffee, of higher quality and preferred in the roasted and ground coffee market, was sold at 58 percent more than the previous year, while Robusta, primarily used in instant coffee, increased by 70 percent in real terms. This indicated a reduction in the price difference between the two varieties for the first time since the mid-1990s. Global coffee production is valued at over 20 billion dollars annually, with global trade exceeding 25 billion dollars per year.
