Coffee Prices Go Up: Why Your Favourite Coffee Might Soon Cost More

In the last few weeks though, coffee commodity traders have seen coffee prices go up with analysts suggesting that coffee retail prices could soon follow.

As prices of goods and services have risen in the last two years, more expensive coffee would weigh on consumer budgets that are already stretched trying to cover their everyday needs.

In this article, you’ll be able to read about the reasons behind the recent coffee price spikes and what the forecasts are.

What’s Going On With Coffee Prices?

Scrolling down the pages of the biggest financial media outlets, you might have bumped into news regarding rising coffee prices. Since the beginning of the year, coffee prices have indeed soared reaching levels not seen for many years causing fears for potential hikes in prices of retail coffee that can be purchased in supermarkets, cafeterias etc.

Robusta coffee futures rose to $4380 per ton on April 25th before retreating to $4182 per ton the next day, while Arabica coffee futures have reached $2.22 per pound (April 26th). Coffee prices have surged over the past month due to concerns regarding crops in Brazil and Vietnam.

A report by Citi commodity analysts, published on CNBC, suggested that coffee prices could rally in the short as well as in the medium term. When asked by CNBC reporters regarding the reasons underpinning the hike, Citi analysts said that “the current move can largely be attributed to a heat wave in Vietnam affecting Robusta coffee production and as a result, providing carryover support for premium Arabica beans.”

Vietnam Coffee Production Hit By Heatwave

Drought seems to be a major problem for coffee production in Vietnam. Vietnam is among the Asian countries with a booming economy and the second largest coffee export country globally. Until mid-1980s, Vietnam had a relatively small coffee bean production amounting to 18,400 tons. The radical changes implemented by government authorities back then, making the country’s economy more market oriented boosted coffee production which has reached 1.9 million tons.

The Vietnam Coffee Association (VCA) has suggested a possible 20% annual drop in coffee exports for the 2023/2024 period, alongside a corresponding 20% reduction in coffee production. The forecast reflects the lowest production level since 2020, primarily due to drought conditions.

According to the Vietnamese VNExpress International newspaper, “financial services company Marex Group has predicted a global shortage of around 2.7 million bags of robusta coffee in the 2024-25 season due to a decrease in production in Vietnam.”

Brazil Set To Raise Coffee Production

A report by Reuters suggested that Brazil is expected to post its third annual increase in coffee production in 2024. Commodity analysts underline the significance of such an event as this has happened only seven times in the last 144 years. Brazil is the largest coffee producer and exporter country in the world.

Coffee specialists mentioned that arabica coffee trees follow a pattern where a high production year is followed by a year of lower production or the other way around. However, arabica’s biennial cycle was broken in 2020 and 2021, when droughts and extreme cold weather conditions swept the country.

To counter the effect of climate change, Brazilian farmers have turned to different types of irrigation and pruning that have played a significant role in the coffee production rising figures.

According to CONAB (Companhia Nacional de Abastecimento or National Supply Company in English), the 2024 crop could come in at 58 million bags, 5% more on an annualised basis than in 2023.

Lavazza Profits Fall Due To Rising Coffee Prices

Gruppo Lavazza, one of the largest retail coffee companies in the world, has started feeling the impact of high coffee prices in its financial reports. On March 27th, Lavazza reported a 14.9% drop in its 2023 core profit, citing a sharp increase in the cost of coffee beans and its decision to limit price increases.

Commenting on the report, Lavazza’s chief executive officer noted that “In 2023, the macroeconomic scenario for the industry was extremely complex ... with prices at record levels for green coffee and Robusta in particular," Lavazza's Chief Executive Officer, Antonio Baravalle, said in a statement. Nevertheless, we chose to limit price increases on our products to protect consumers, maintaining volumes but sacrificing our profitability.”

Illycafe Profits Rise In 2023

The Italian company, commonly known as Illy, saw its sales grow by 6% on an annualised basis, reaching $645.8m in 2023, with growth noted across its key US, Italy and China growth markets.

Online sales played an important part regarding a 15% revenue increase in the US, with digital channels also helping sales channels in Italy and China. Illycafe’s CEO, Cristina Schoccia, said that "2023 represents another year of record growth for Illycaffè, with double-digit increase in EBITDA and net profit, despite the continuation of challenging macroeconomic conditions. We are highly pleased that our strategic direction is yielding the expected results in terms of sustainable and profitable growth.”

Trading Coffee With An Admirals Account

Having a trading account with Admirals allows traders to trade various commodities including Coffee Arabica and Coffee Robusta, making them a part of their trading strategies.

Lack of experience is evident if you are a beginner trader. As the world of trading is quite fast paced, trading actions require quick decisions that beginner traders may not be enough experienced to make. As mistakes can cause loss of funds and experience can’t be bought, traders should try to improve their trading skills by training themselves. A good way to do it is delving into educational materials such as articles, guides, webinars provided by brokers. 

Mitigating risks is also one of the top priorities for beginner traders. One of the ways to mitigate risks is by using a stop loss order or a take profit order. Reading about how these orders should be used and practicing using a demo trading account are good ways to become accustomed to them and start incorporating them into your strategies.

Test Your Trading Strategies on an Admirals Demo Account

Are you interested in practising trading without risking your funds? A demo trading account from Admirals allows you to do just that, whilst trading in realistic market conditions. Click the banner below to open a demo account today:

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.