Unpacking the Coffee Price Surge: Climate, Demand, and Beyond.

Green coffee prices have recently surged to their highest levels since April 1977, driven by fears over supply disruptions in top-producing nations like Brazil and Vietnam, the anticipation of the EU Deforestation Directive (EUDR), and many other factors putting immense strain on the broader supply chain.

Let's dive into the major elements of this market-wide phenomenon to help you understand the full scope of the situation.

→ Weather-Related Challenges.

The coffee industry has been severely impacted by weather-related disruptions in multiple coffee-growing regions. Brazil, as the world’s largest coffee producer, has faced significant weather challenges this year, including droughts, frosts, and excessive rainfall. These events have led to a reduced harvest, with the 2023 crop in particular suffering. However, Brazil is not alone in facing weather-related difficulties.

In Vietnam, the second-largest coffee producer, coffee yields have also been hit by weather extremes, such as flooding and irregular rainfall patterns. These unpredictable conditions, coupled with climate change, have reduced the quantity of high-quality beans available globally, contributing further to the rising prices.

→ Ongoing Supply Chain Struggles.

While global trade is recovering, disruptions in logistics continue to present significant challenges. Port congestion, rail strikes, and severe weather events like hurricanes have caused delays in shipments, increasing both transportation and storage costs.

These disruptions have compounded the issue, making it more expensive and challenging to move coffee from producing countries like Brazil to Canada and other global markets. As a result, these added costs are passed along throughout the supply chain.

→ Increased Production Costs.

Coffee producers are facing rising costs, and many are being forced to adapt to ensure continued viability. In response to the challenges posed by weather events, there has been an increasing trend toward investment in irrigation systems to help manage water resources and stabilize yields.

While these investments will likely pay off in the long term, the upfront costs are substantial, which is contributing to increased production expenses.

Additionally, rising fuel, labor, and material costs are making it more expensive to grow, process, and transport coffee. These factors are affecting the cost of production in Brazil and other coffee-growing countries, which ultimately leads to higher green coffee prices for us as importers.

→ Growing Global Demand.

The demand for specialty coffee is growing rapidly, especially in emerging markets. Recently, we’ve seen major deals in countries like China and the UK, where large volumes of coffee have been secured to meet anticipated demand.

In the case of the UK, much of the increased demand is linked to preparations for the upcoming deforestation law changes, which are expected to impact the global coffee trade by encouraging more sustainable sourcing practices. These shifts are further tightening the supply of high-quality coffee beans, especially premium, traceable coffees, driving up prices.

→ Record High Coffee Market Prices.

The coffee futures market has recently reached record highs, reflecting a combination of the above factors.

Exporters in Brazil and other coffee-producing countries are facing rising costs for procurement and transportation, which are being passed along to importers like us. As the market prices continue to fluctuate, farmers have been able to sell their coffee domestically at a higher price, making it more attractive for them to keep their harvests within their home countries rather than export.

In fact, farmers can now sell coffee internally and get paid in just 7 days, often receiving more than $1 USD per pound over last year’s prices. This internal market price shift has made securing coffee for export even more competitive.

The Impact on Exporters, Importers, and You.

We understand that rising coffee prices affect everyone across the supply chain—from producers in Brazil to roasters here in Canada. As exporters, we are facing tighter margins due to increased procurement and transportation costs. As importers, we’re also dealing with these rising costs and working hard to maintain strong relationships with our producers to mitigate sudden price hikes.

Our team is committed to managing these challenges on your behalf. We’ve been diligently working to maintain competitive pricing and secure the best possible options for you, but as the market remains volatile, we want to be transparent with you about the likelihood of price adjustments as we work to ensure we secure enough coffee for the year and the coffees we know you and your customers will enjoy!