Arabica Coffee Prices Soar to Highest Level Since 1977 Amid Brazil’s Drought Concerns
Arabica coffee prices have reached their highest level since 1977. The price of a pound of Arabica beans in New York hit 320.10 US cents today. This marks a significant increase over the past year. The previous day, prices surpassed a nearly 30-year high.
Brazil, the largest coffee producer globally, is facing a serious drought this year. This drought raises concerns about coffee production potential for 2025/2026. Recent significant rains in October have improved crop conditions, leading to “excellent flowering,” according to Guilherme Morya, senior analyst at Rabobank.
Geopolitical issues also play a role in price increases. Shipping disruptions in the Red Sea and potential US tariffs are contributors. Future European Union regulations on deforestation may also impact prices.
While demand remains strong, farmers are selling only what they need. This strategy limits coffee supply in local markets.
Interview with Guilherme Morya, Senior Analyst at Rabobank on Rising Arabica Coffee Prices
News Directory 3: Thank you for joining us today, Guilherme. Arabica coffee prices have surged to their highest point since 1977, hitting 320.10 US cents a pound. What factors do you attribute to this significant increase?
Guilherme Morya: Thank you for having me. The spike in Arabica coffee prices is primarily driven by a combination of adverse weather conditions, notably the drought in Brazil, and ongoing geopolitical tensions that disrupt supply chains. The drought has created uncertainties regarding Brazil’s production capacity for the upcoming 2025/2026 harvest, raising concerns among traders and investors.
News Directory 3: You mentioned the drought in Brazil. Can you elaborate on how it has affected the coffee crop, and what recent weather developments might mean for the future?
Guilherme Morya: Absolutely. Brazil, as the largest coffee producer globally, is heavily impacted by this drought. However, we did see some significant rains in October that have improved crop conditions, which is promising for the flowering stage. This means we could potentially see a better yield than initially feared, but the long-term effects of the drought on overall production cannot be overlooked.
News Directory 3: Geopolitical issues are also mentioned as contributing factors. Can you explain how these are affecting coffee prices?
Guilherme Morya: Certainly. Disruptions in shipping routes, particularly in the Red Sea, have caused delays and increased costs for transporting coffee beans. Additionally, there are potential tariffs being discussed in the US, along with the implications of new European Union regulations on deforestation that could affect sourcing and ultimately lead to increased prices. These geopolitical factors create an unpredictable market environment.
News Directory 3: Demand for coffee remains strong. How are farmers responding to this situation when it comes to their sales strategies?
Guilherme Morya: Farmers are currently selling only as much coffee as they need, which is a direct response to the uncertainty in production and prices. This strategy helps them maintain some control over their pricing and ensures they can meet their immediate operational needs without flooding the market, which can drive prices down.
News Directory 3: What about Robusta coffee? We’ve heard that Vietnam is facing its own supply issues. Can you give us an overview of that situation?
Guilherme Morya: Yes, Vietnam is experiencing significant supply challenges for Robusta beans, resulting from dryness during the growing season. This has pushed prices for Robusta beans to around $5,200 per tonne, following a peak of $5,829 in mid-September. Robusta is often used in instant coffee, and any supply issues there can lead to increased prices for consumers as well.
News Directory 3: what should consumers be aware of as they look ahead in this evolving coffee market?
Guilherme Morya: Consumers should be prepared for potential price increases as both Arabica and Robusta supplies are under pressure from weather and geopolitical factors. As the market adjusts, we might also see shifts in the types of coffee products available, as producers navigate through these challenges. It’s crucial for consumers to stay informed about these fluctuations.
News Directory 3: Thank you for your insights, Guilherme. Your expertise is invaluable as we navigate these complex dynamics in the coffee market.
Guilherme Morya: Thank you for having me. It’s always a pleasure to discuss these important issues.
In addition, Vietnam faces supply issues for Robusta beans, which are cheaper and used in instant coffee. The country experienced dryness during the growing season. Currently, Robusta beans are trading at around $5,200 per tonne. This follows a record price of $5,829 in mid-September.
The coffee market is under pressure from weather events and geopolitical factors, affecting both Arabica and Robusta supplies.