Coffee prices have soared to their highest levels in 47 years. Arabica futures recently hit $3.35 per pound, a 70% increase since January. Prices haven’t reached this level since 1977.

Extreme weather and droughts in Brazil and Vietnam, the top coffee producers, have fueled fears of reduced harvests. Vietnam suffered prolonged droughts, followed by heavy rains that delayed harvesting.

Ole Hansen, Saxo Bank’s Head of Commodity Strategy, stated, “A challenging growing season in Vietnam has now shifted concerns to Brazil, where adverse weather threatens the 2025 Arabica crop.”

Climate and Geopolitical Challenges

Brazil, the main Arabica producer, endured its worst drought in decades before October rains arrived. Soil moisture remains insufficient, raising fears about underperforming crops and pushing benchmark Intercontinental Exchange (ICE) prices higher.

Arabica futures for March delivery reached $3.14 per pound on Thursday, rising after briefly falling from November’s $3.35 record. Arabica prices have risen nearly 70% this year, while Robusta prices climbed more than 60%.

Global coffee demand continues to grow, especially in China, but production depends on a few key tropical countries vulnerable to climate change, including Brazil, Vietnam, Colombia, Indonesia, and Ethiopia.

Geopolitical issues have worsened the situation. Houthi attacks in the Red Sea have disrupted shipping routes, increasing uncertainty and prices.

The US Department of Agriculture (USDA) reduced Brazil’s 2024/25 coffee production forecast to 66.4 million bags from 69.9 million. This represents only a 0.2% increase over the previous season. The USDA attributes limited growth to adverse weather in key producing regions.

Consumers are already feeling the price hikes. Nestle SA, the world’s largest coffee producer, recently announced further price increases for products like Nespresso capsules.