Climate change pushes coffee prices up 40%

The Food and Agriculture Organization of the United Nations (FAO) announced Friday that global coffee prices reached their highest level in several years in 2024, with an increase of 38,8% compared to the previous year's average, mainly due to adverse weather conditions affecting major producing countries.

According to an FAO note on global coffee market trends, consulted by the Middle East, in December 2024, the price of Arabica coffee, a high-quality coffee preferred in the roasted and ground coffee market, increased by 58% compared to the previous year, while the price of Robusta coffee, used mainly for instant coffee and blends, increased by 70% in real terms. This indicates a convergence of prices between the two types for the first time since the mid-90s.

The FAO has indicated that coffee export prices could increase further in 2025 if major coffee-growing regions experience a significant drop in supply.

The main factors behind the recent price increase are Vietnam's export restrictions, Indonesia's declining production, and poor weather conditions affecting coffee production in Brazil.

In Vietnam, prolonged drought has led to a 20% drop in coffee production for the 2023-2024 season, with exports down 10% for the second consecutive year. Similarly, in Indonesia, coffee production for the 2023-2024 season fell 16,5% compared to the previous year, due to heavy rains in April and May 2023 that damaged coffee beans; exports fell 23%.

In Brazil, dry and hot weather conditions led to successive downward revisions to the previous season's production forecasts, with official estimates going from an expected increase of 5,5% to a decrease of 1,6%.

It has also been found that increasing shipping costs are one of the factors contributing to the rise in global coffee prices.

Preliminary data indicate that in December 2024, rising global prices led to a 6,6% increase in coffee prices in the United States and 3,75% in the European Union, compared to the same period in 2023.

Bobker Ben Belhassen, director of FAO's Markets and Trade Department, said: "Rising prices should stimulate investment in technology, research and development in the coffee sector, which relies heavily on smallholder producers, to strengthen its capacity to adapt to climate change," adding that climate change affects coffee production in the long term.

FAO supports many coffee-producing countries to help farmers adopt climate-resilient technologies, also helping to restore lost biodiversity.

FAO highlights the importance of market transparency and encourages cooperation among all actors in the value chain to support sustainable growth of the global coffee sector, while protecting the livelihoods of millions of smallholder farmers worldwide.

It's worth noting that Brazil and Vietnam together account for approximately 50% of global coffee production. Smallholder farmers play a vital role in the coffee industry, accounting for 80% of global production. The global coffee trade is estimated to be worth over $25 billion annually, while the global coffee industry generates annual revenues of over $200 billion.