Coffee lovers worldwide should brace for a significant hit to their wallets as adverse weather conditions and supply chain disruptions push coffee bean prices to a 13-year high. Brazil, the world's leading coffee producer, grapples with severe drought, intensifying the global shortage and driving up costs for consumers across the board.
Coffee, one of the world's most coveted commodities, has already experienced substantial price increases in recent years. However, your daily cup is poised to become even more expensive.
In the US, futures contracts for coffee beans surged nearly 5 percent, reaching $2.718 per pound – a price not seen since 2011. The shortage of the more affordable Robusta beans has fueled increased demand for the Arabica variety.
Brazil's coffee fields have been ravaged by intense heat and drought, resulting in a significant shortfall as the country wraps up its 2024-25 harvest. "It all comes down to the weather," Kona Haque, head of research at ED&F Man, told Bloomberg. Haque pointed to the challenging conditions in growing regions and the looming drought expected in the weeks ahead.
Concerns are mounting as South America braces for a severe drought, which threatens to impact next year's yield as well. "Rainfall in Arabica growing areas has consistently fallen below normal levels since the dry season began in April," Carlos Mera, an analyst at Rabobank, explained to Bloomberg. "This issue compounds an already strained situation where the coffee industry is grappling with port congestion in multiple countries, a global container shortage, disruptions in the Red Sea region, and disappointing harvests in Vietnam."
The ripple effects of these supply chain disruptions have already manifested in price hikes. Consumers in the United States, Europe, and Israel have seen coffee prices climb. This increase in coffee prices contributes to overall inflation and joins a series of price hikes across various retail products.
In Israel, the latest economic data reveals a significant spike in inflation, with the Consumer Price Index jumping to 0.9 percent, well above forecasts. This increase is reflected across various sectors of the Israeli economy. Notable price hikes were observed in several categories: Fresh vegetables saw a dramatic surge of 13.2%, transportation costs increased by 2.8%, and housing expenses rose by 0.6%.
