Coffee Prices Have Hit A Half-century High Even Before Trump's Potential Tariffs Kick In

Coffee prices are on a tear.

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• Coffee prices hit the highest in half a century due to supply issues and bad weather.
• Brazil's drought and heavy rains are impacting coffee production, causing supply concerns.
• Global demand and potential tariffs could further increase coffee prices for US consumers.

Coffee is more expensive — and it's only going to get worse.

Coffee beans have just hit their highest prices in nearly half a century due to bad weather and a mad scramble for supplies.

This surge means that coffee prices across the board — from fancy beverages made from Arabica beans to robusta-fueled instant coffee — are almost sure to cost more for the everyday consumer.

On Wednesday, the global benchmark for arabica coffee — March 2025 arabica coffee futures — ended 4.6% higher on the Intercontinental Exchange (ICE) at $3.2305 per pound, after hitting their highest level since 1977.

ICE arabica coffee futures have soared over 70% this year to date.

Meanwhile, benchmark ICE robusta coffee — a cheaper grade compared to arabica — ended Wednesday 6.9% higher, at $5,533 a metric ton. ICE robusta coffee futures are up 80% this year to date.

Food giant Nestlé, the world's largest coffee maker, said last week that it will hike prices to deal with the rise in coffee prices.

Coffee drinkers are already paying more: Data from the US Bureau of Labor Statistics show coffee prices for urban consumers rose sharply from July 2021 to February 2023. They remain elevated.

"The price of coffee being elevated certainly doesn't help the US consumer," Jason Miller, a professor of supply chain management at Michigan State University, told Business Insider.

Weather woes

Coffee prices have surged this year due to several factors, including bad weather in Brazil, the world's largest coffee producer.

Farmers in Brazil — who produce nearly half of the world's Arabica beans — have been reluctant to sell their beans as they hold out for even higher prices after selling 70% of their current crop, traders told Reuters.

In August and September, the country was hit by its worst drought in 70 years, so Brazil's growers are betting on more price gains due to concerns about the next harvest.

While Brazil's dry spell was followed by heavy rain that helped trees flower, there are now concerns about whether the flowers will develop properly to form cherries that house seeds — or coffee beans, wrote Guilherme Morya, a senior beverages analyst at Rabobank, an agriculture-focused lender, on Monday.

Morya added that the uncertainty surrounding Brazil's current growing season is raising "significant concerns" about the amount of beans that will be produced for the next marketing year, which starts in July.

While some end users may substitute arabica coffee beans with the cheaper robusta variant, those prices are soaring, too.

Vietnam — the world's second-largest coffee producer and the largest robusta source — was beset by heavy rains in recent weeks after a drought earlier this year. The current harvest will follow three years of supply deficits.

Since prices have been broadly rising since 2021, coffee farmers in Vietnam, like those in Brazil, are also holding out for even higher prices, local media reported on Thursday.

Other major growers, including Colombia — the second-largest arabica producer — and Honduras are also dealing with their own weather woes.

Growing coffee demand as US tariffs loom

Meanwhile, growing global demand among an ever-increasing number of daily coffee drinkers has added another obstacle to the problem of limited supply, supply chain experts told BI.

Christopher Tang, a professor of supply chain management at UCLA, said people's evolving coffee tastes could also be contributing to the arabica price gains.

As consumers seek out fancier drinks that use arabica, growers in Brazil and Colombia are struggling to keep up with demand, in part because it takes years to grow a coffee plant before its beans can be harvested, Tang said.

And it could get even more expensive for American coffee drinkers.

During his campaign, President-elect Donald Trump promised universal tariffs on all goods imported from overseas. Since being elected, however, he has only announced plans for tariffs on Canada, Mexico, and China.

But Miller said that if Trump's tariffs extend to countries like Brazil, Colombia, and Vietnam, imported goods like coffee beans would see markups.

The centrist think tank Third Way estimated that Trump's potential tariffs would add $0.23 to the price of one pound of coffee.

As coffee shops and roasters contend with increased costs along the supply chain, they will almost certainly continue to raise consumer prices.

Some Americans are already stocking up on various products — including coffee — ahead of Trump's second term, which starts on January 20, to avoid paying higher taxes.

European stockpiling, Brazilian logistics bottlenecks

It's not just Americans.

The Europeans, too, have also been stocking up this year ahead of a new European Union legislation that requires importers to prove that what they import into the bloc wasn't grown on deforested land.

The legislation, which was to take full effect from the end of December, prompted an increase in commodity imports — including coffee — to the EU, wrote BMI Research in a November 8 note.

In October, the European Commission proposed a 12-month delay to its implementation to give stakeholders more time to prepare.

To add fuel to the fire, there are "intense logistical bottlenecks" at Brazilian ports this year due to a lack of infrastructure to process container cargo, according to Brazil's coffee exporter group Cecafé on Monday.

The group added that 1.7 million 60-kilogram bags of coffee were stuck at the country's ports by October.

Speculators jumping into the coffee market

Given the confluence of factors pushing up coffee prices, non-commercial speculators, such as funds, are joining the market.

Funds are "exploiting momentum" because they react to market flows and systemic trading according to Sucafina, a Swiss coffee trading firm, on Thursday.

"Non-commercial participants aim to get the momentum right. They sell into weakness and buy into strength," the firm wrote.

While the activity of non-commercial participants in coffee futures is opportunistic, the resulting market volatility makes it difficult for roasters, many of whom buy on a "hand-to-mouth" basis due to high financing costs, the firm wrote.

"This strategy works fine when prices are stable but backfires in volatile markets (like now)," Sucafina added.