The rise in coffee prices is primarily driven by environmental factors, particularly droughts affecting key producing countries like Brazil and Vietnam.
The coffee market is experiencing a significant imbalance between supply and demand, leading to predictions of continued price increases and potential shortages in the coming years.
Speculative trading activity is influencing price volatility, indicating a complex interplay between market speculation and actual supply conditions.
If drought conditions persist and production does not recover, coffee prices may continue to rise, potentially reaching $4.2 per pound.
The coffee market may stabilize in the first half of 2025 as new harvests become available, provided that weather conditions improve and logistics are restored.
Retail coffee prices in Russia may remain stable despite global price increases, as local market dynamics play a significant role in pricing.
On December 10, 2024, world coffee prices reached a record high, with Arabica beans exceeding $3.49 per pound, marking the highest price since 1960. This surge is attributed to severe drought conditions in Brazil and Vietnam, which are major coffee producers. The U.S. Department of Agriculture revised Brazil's expected coffee production down to 66.4 million bags for the current season, a significant drop from earlier estimates of 69.9 million bags. Analysts predict that the coffee market may face a shortfall of 8.5 million bags in the 2025-26 season due to ongoing drought effects, continuing a trend of deficits for five consecutive years.
Concerns about logistics and geopolitical tensions, particularly in the Red Sea and Panama Canal, have further complicated the coffee supply chain. Speculative trading has also contributed to price volatility, with some analysts suggesting that prices could rise by an additional 5-10% by the end of the year, depending on weather conditions and market dynamics. Despite the global price surge, retail coffee prices in Russia have remained relatively stable, with only a modest increase of 5-6% in consumer goods prices. This stability is attributed to the relatively low cost of coffee beans in the final product, which constitutes only 8-12% of the total price.
