Coffee prices hit record high. Here’s why

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Coffee prices have joined cocoa in soaring to record highs. Extreme weather in top-producing countries Brazil and Vietnam has caused coffee prices to surge, spurring fears over shortages.

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This month, futures for robusta reached an all-time high in data going back to 2008. “There’s not much coffee left unsold in Vietnam,” Carlos Mera, head of agricultural commodities at Rabobank, told the Financial Times.

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Vietnam is the world’s largest grower of robusta, the generally cheaper species used in instant coffee and espresso, and is second to Brazil in overall coffee production. Farmers were already under pressure. Now, during what’s supposed to be the country’s rainy season, a heatwave is damaging the crop, raising concerns of a global shortage and sparking a “buying spree.”

According to the Vietnam Coffee Cocoa Association, the country predicts a 20-per-cent drop in production in the current crop year. “Combined with the fact that the market is ‘waiting for rain’ in Vietnam’s coffee region, the supply situation will probably remain tense,” the association said in a recent report.

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Meanwhile, extreme weather in Brazil is affecting arabica, the world’s most widely consumed brew and specialty coffee’s bean of choice.

Newsweek reports that arabica futures rose to the highest level since September 2022, partially due to atypical weather in the country’s coffee-growing regions. Minas Gerais, where roughly 30 per cent of Brazil’s arabica is grown, has been especially hard hit, with rainfall over three times the average at a crucial time for bean development.

“An El Niño pattern typically brings heavy rains to Brazil and drought to India, negatively impacting coffee crop production,” according to an Agriway Partners report. “The El Nino event may bring drought to Vietnam’s coffee areas.”

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Surging prices pose a threat to coffee makers worldwide and could mean an increase in retail prices for coffee drinkers. (Canada is the sixth-largest importer of coffee in the world and the 10th-largest consumer at 6.5 kilograms per person per year.) Italian coffee company Lavazza recently said its profitability is suffering due to “the sharp increase in the cost of the raw material,” despite last year’s 13-per-cent increase in revenue.

Volatile prices also take a toll on the mental health of coffee farmers, according to a new international study published in the American Journal of Agricultural Economics. “Our results suggest that not only poverty but also the risk of poverty caused by fluctuating prices has a significant additional negative effect on the mental well-being of farmers in low-income countries,” said Finn Tarp, professor at the University of Copenhagen and coordinator of the Development Economics Research Group.

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