In recent years, the global coffee market has experienced significant price instability, with notable increases in both Arabica and Robusta coffee prices. This volatility, which has intensified in 2024, reflects a combination of climatic, economic, and political factors, reshaping the dynamics of the entire sector.
A Snapshot of Rising Prices: Arabica and Robusta
The USDA’s Department of Agriculture, in its November FAS reports, has made significant downward adjustments to the 2024/25 coffee production forecasts for Brazil and Indonesia compared to mid-year estimates. In Brazil, Arabica production was reduced by 6%, from 48.2 to 45.5 million bags, and Robusta by 3%, from 21.7 to 21 million bags. Similarly, Indonesia’s Robusta production forecast was cut by 8%, from 9.5 to 8.6 million bags, lowering the year-on-year growth from +40% to +36%.
These reductions are only partially mitigated by production increases in Colombia (up from 12.4 to 12.9 million bags) and India (rising from 6 to 6.2 million bags). This comes against a backdrop of stock levels projected to be the lowest since 2001, ongoing macroeconomic uncertainty, and weather-related risks that may also affect the 2025/26 harvests.
According to Areté’s analysis, financial coffee prices have reacted with significant upward volatility, reversing a period of mild deflation. Since the beginning of November, Arabica prices have risen by 28% and Robusta by 21%, with year-to-date inflation reaching 64% and 72%, respectively.
These developments underscore the substantial pressure on the market, impacting the entire supply chain and ultimately affecting consumers.
The Causes of Instability
The reasons behind this volatility are complex and multifaceted. First and foremost, adverse climatic conditions are playing a critical role. Droughts and frosts in key producing countries such as Brazil and Vietnam have significantly reduced harvests, tightening global supply. Adding to this, rising production costs, including increased prices for fertilizers and energy, have further burdened coffee producers.
Another critical factor is financial speculation. Market fluctuations are exacerbated by speculative activities, with investors betting on further price hikes, creating instability and uncertainty. Moreover, the introduction of the European Union’s Deforestation Regulation (EUDR) has added regulatory uncertainty. The ambiguity surrounding the regulation’s enforcement has triggered immediate market reactions. Robusta and Arabica coffee prices rose by 3.1% and 2.7%, respectively, on the day of the announcement, underscoring the direct impact of international policies on the sector, as reported by Areté Agrifood Company.
Corporate Responses to the Crisis
Faced with this challenging scenario, leading companies in the sector are adopting diverse strategies to cope with price volatility and safeguard profitability. Starbucks, for instance, has reduced its reliance on fixed-price contracts for purchasing green coffee, opting for greater operational flexibility. However, this decision has raised concerns among investors, given that the coffee giant procures 3% of global coffee production and could be particularly vulnerable to further market shocks.
Nestlé, on the other hand, has taken a different approach by focusing on sustainability through its “Nescafé Plan 2030.” The company aims to enhance crop resilience with regenerative agricultural practices, supporting farmers with training and innovative resources. Nevertheless, despite these efforts, Nestlé recently announced plans to adjust consumer prices to offset market fluctuations.
Lavazza is focusing on innovation and diversification to mitigate the impact of price swings. The expansion of its premium “La Reserva de ¡Tierra!” range demonstrates how the company is striving to add value to its products while maintaining competitiveness. Despite rising raw material costs, Lavazza has chosen to absorb part of these increases, preserving sales volumes and strengthening its market position.
Toward a More Sustainable Future
The instability in coffee prices underscores the urgency for a paradigm shift. Investments in sustainability and support for farmers through more resilient practices are essential to address climate changes and economic pressures effectively.
Leading companies, as key drivers of this transformation, must balance cost management with a commitment to an ethical and sustainable supply chain while shielding consumers from excessive price hikes. Only by doing so can the global coffee market achieve greater stability and sustainability for the future.
