Caffeine Catastrophe : Coffee Prices Soar As Supply Struggles To Keep Up
Since the turn of the year, coffee prices have exploded. While coffee prices have historically been volatile, the current prices are the highest on record.
As of this week (11/02), coffee prices are sitting at a 52-year high of 4.30$ per pound, nearly triple the price in September 2023 of 1.50$/lb.
What's Driving The Price Hikes ?
Brazil, Vietnam, Indonesia and Colombia, the top 4 coffee producing nations in the world, have all been experiencing intense and erratic weather patterns. Intense droughts followed by torrential out-of-season rainfall has severely damaged the coffee harvest. Among these top producers, total yield is down an estimated 3-4 million bags for each country.
Also, farmers have been reluctant to sell their harvests. The increasingly unstable climate of coffee-producing regions and the volatile price of coffee have made coffee production an uncertain source of income. Many farmers are choosing to sell as little of their harvest as possible and create stocks for the years to come should natural catastrophes cause an even greater drop in production.
Finally, demand has outpaced supply. As global demand for coffee continues to rise, the Chinese coffee market has established itself as one of the quickest-growing in the world, with massive demand from consumers. Combined with supply shrinkage, this has contributed to coffee being both increasingly rare and sought after.
On top of all this, recent political tensions between Colombia and the United States have resulted in intense price hikes. The Trump administration's tariffs have made the already premium Colombian arabica beans even more pricey for consumers.
Authorities in Brazil and Vietnam have found evidence of coffee batches being cut with leaves, husks and other substitutes. Warnings have been issued to consumers and buyers about counterfeit coffee.
The Same Prices from Minas Gerais to Dak Lak
But why does Brazilian production and Colombian-American tariff wars matter to Vietnam ? Is the question I asked Robert, a coffee roaster and distributor based locally in Ho Chi Minh City. “Farmers don’t decide prices. Coffee prices are set by stock exchanges and traders, and they usually go off the state of the biggest harvest. It just so happens that Brazil and Colombia produce most of the arabica in the world, so their harvest determines the price in Vietnam.”
As for Vietnamese farmers being wary of selling : “It’s normal. These people have very little control over the price of the goods they work hard to create, so they’re always trying to get the best price. If things stabilize the supply of coffee should start flowing again. But right now demand is so high.”
Coffee, A Fragile Cash Crop
Experts are saying these price hikes could last until July, but the future of the coffee industry as a whole is increasingly bleak. Commercial varieties of coffee are very difficult plants to grow, requiring misty, high-altitude tropical conditions with temperatures between 18-21 degrees celsius. Repeated exposure to temperatures over 24 degrees will damage the plants and the harvest. At 30 degrees and over, the plants are irreversibly damaged.
Coffee is also increasingly susceptible to parasites. The coffee borer, a small beetle native to Africa, is now found in coffee plantations all over the world. This insect burrows into coffee cherries to lay its eggs. Once they hatch, the young dig their way out of the fruit, ruining it. Pesticides are unadvisable because of the sensitivity of the coffee plants, and other methods of treatment involving birds are expensive and hard to implement outside of their native habitats (Central America).
Coffee trees are also vulnerable to fungal infections, particularly coffee rust. An outbreak in Central America in 2011 left 350,000 people out of work, their plantations having been overrun by the rapidly-spreading and increasingly resistant fungus.
As global warming intensifies, the already select areas where coffee can be grown are becoming smaller and smaller. Furthermore, coffee is one of the least genetically diverse commercial crops in the world. Commercial arabica varieties account for only 10% of wild coffee's genetic diversity. Wild coffee is found only in a small and hard to access area in the world, in the rugged and remote Southern Ethiopian highlands and the Boma Plateau of South Sudan.
Preserving the genetic diversity of coffee is essential for the future of the crop. With global warming showing no signs of slowing down, farmers will need to develop new, climate-adapted varieties for the plantations of tomorrow. This is impossible without accessing the rapidly shrinking population of wild plants and their unique characteristics.
A Major Asset For Minorities
The coffee industry employs an estimated 125 million people world wide, 3 million of which live in Vietnam, the 2nd biggest exporter and producer in the world. It's an extremely important industry in the national economy that generated 6.61 billion USD in revenue last year; a 1.5% share of the GDP.
Coffee farmers are dependent on the crop for their livelihoods, as growing it is a complicated process and the vast majority of farmers solely grow coffee. This is particularly true in Vietnam, where most coffee is produced in the poor, rural and isolated provinces of the Central Highlands; the plantations are often tended to by ethnic minority groups like the Ede who have few economic alternatives.
While the immediate consequences are a simple increase in price for a cup of morning joe, the long-term impact of climate change on coffee is more serious than many might realize. Unless the current trend changes drastically in the next few years, we can expect coffee to look, taste and cost very different from the familiar brew of today.