Coffee Prices Reach New High amid Global Supply Concerns

Coffee prices rose about 5% on Tuesday to $347 a contract - 100 pounds - and hit a record high.

Since the beginning of 2024, coffee prices have risen by about 83%, surpassing the highest levels seen in 1975 when the Black Frost disaster destroyed Brazilian coffee trees.

This increase comes after growing concern about the global supply crisis that could make coffee a luxury commodity.

At the same time, global food prices have now risen by more than 25 percent since 2020.

Inflation, along with many supply-side shocks, has led food prices to rise to record levels in many categories.

The severe drought that hit Brazil during 2024 has increased concerns about the country's production, as well as Vietnam, which has seen a severe drought in the main area of coffee cultivation, raising fears of supply shortages.

Vietnam and Brazil are the world's largest coffee producer.

In July 2024, the International Coffee Organization, an intergovernmental organization founded in 1963 with the support of the United Nations, said that the organization's composite coffee price index - a key reference price for the global coffee industry - reached its highest level in 13 years at about $2.27 per pound.

The lack of cheaper Robosta beans has fueled demand for specialty chains' favorite Arabica group, and Ryan Delaney, founder and lead analyst at the Coffee Trading Academy, said there was not enough coffee in the world.

Nestlé, the world's largest coffee producer, announced in November that it would introduce price increases and make bags smaller to reduce the impact of high grain prices on its net profit.