KANSAS CITY — The coffee market is witnessing an unprecedented spike, with futures prices in New York and London soaring to levels never seen before.
This dramatic increase echoes trends observed in cocoa futures and cash egg prices in the U.S., all unfolding against the backdrop of a constrained global supply, with no immediate respite in sight.
Record High Futures Prices
Since late January, arabica coffee futures traded on ICE Futures US have been breaking records, crossing the $4 per pound mark for the first time during trading on February 5.
This impressive leap signifies a 25% rise since the start of 2024, contributing to a staggering 70% increase year-to-date.
Robust coffee bean futures in London have also climbed to new heights, although they have since seen a minor pullback.
While coffee is grown in over 70 countries, Brazil remains the dominant player in the market, much like its commanding presence in soybeans and sugar cane.
Any fluctuations in Brazil’s coffee production can have far-reaching effects on global supply and pricing.
Production Challenges in Brazil
Recent insights from Conab, Brazil’s national food supply agency, reveal a troubling trend in production levels.
Their early estimate for the 2025 marketing year, released at the end of January, projects Brazil’s coffee output to be around 51.8 million bags—a decline of 4.4% from 2024.
This downturn is primarily linked to the severe drought conditions experienced in 2024, which not only hampered last year’s production but also resulted in delayed rainfall.
Specifically, arabica production is expected to fall by 12%, partly due to its natural harvest cycles.
Conversely, robusta production appears more robust, with forecasts suggesting a 17% increase, reaching 17.1 million bags thanks to favorable rainfall.
Comexim, a leading coffee exporter from Brazil, offers a slightly different forecast, published on February 3.
They predict a total coffee production of 63.2 million bags for 2025, representing a slight decline of 1.8% from the previous year.
Their analysis indicates a more significant drop in arabica output, countered by a rise in robusta production, underscoring the complex interactions between weather patterns and crop yields.
Speculators and Market Trends
The potential of Brazil’s coffee industry was notably visible during the 2020 harvest, which reached about 70 million bags, showcasing the country’s resilience even under pressure.
A significant driver behind the recent surge in futures prices has been speculators betting on the market’s upward momentum.
According to a report from the U.S. Department of Agriculture in December, the global coffee landscape is expected to produce approximately 174.8 million 60 kg bags for the 2024-25 term.
While this figure reflects a slight reduction from earlier estimates, it still marks a 4.1% increase from the previous year, primarily due to increased output from Vietnam and Indonesia.
Nevertheless, arabica coffee, predominantly cultivated in Brazil, remains a key player in the market.
The USDA predicts Brazil will produce roughly 66.4 million coffee bags for 2024-25, showing a modest increase compared to last year.
Brazil accounts for nearly 46% of the world’s arabica beans, with Colombia, Ethiopia, Honduras, and Peru trailing.
Globally, Brazil produces an impressive 38% of all coffee beans, significantly outpacing Vietnam’s share of 17%, while other nations contribute less than 10% each.
Arabica beans, revered for their quality and rich flavor, continue to captivate coffee aficionados, whereas robusta beans, known for their stronger profile, are more commonly found in instant coffees and espressos.
This diversity reflects the varying tastes of coffee lovers worldwide.
The coffee market’s resilience is noteworthy, especially in contrast to a recent downturn in cocoa demand following record highs.
Many consumers remain committed to their favorite coffee beverages, even at increased prices, highlighting an enduring passion for this beloved drink.
Looking ahead, the evolving coffee landscape promises to keep all those intrigued and engaged.
Source: Foodbusinessnews