Sustained high arabica prices have created an unprecedented time for the coffee industry. Arabica futures, which hit a record high of US $4.41/lb in early February, have risen consistently since April 2024.
Everyone across the supply chain is feeling the effects. While roasters and traders grapple with tighter margins and cash flow crises, producers face difficult decisions about where to sell their coffee. Some are declining long-term contracts to sell at higher prices, hoping to reinvest in their farms. Traditional trade dynamics are shifting, and everyone needs to adapt.
For producers specifically, there’s a narrative that higher prices mean higher profits, but the reality is more complex. Unpredictable weather, rising fertiliser costs, and labour shortages all add pressure to farmers’ operations. Additionally, buyers are more cagey, so more options don’t necessarily equate to a better position for producers.
I spoke to Bram de Hoog, the founder of Paso Paso Coffee, and Judith Ganes, president of J. Ganes Consulting, to find out more.
You may also like our article on why record coffee prices signal a new era for the industry.
Trade dynamics are changing for the long term
The C market relies on coffee futures, or contracts purchased previously, whereby producers honour a set price to sell their coffee to an importer or another intermediary.
This builds the baseline price for arabica and determines the current price for physical coffee. Buyers and sellers negotiate contracts through price discovery – agreements made prior to harvests or through long-term relationships.
But other factors are also at play. Coffee prices are at their highest levels since the late 1970s, driven by the climate crisis, supply shortages in Brazil and Vietnam, and longstanding logistical challenges.
US President Trump’s recent sweeping global tariffs on over 180 countries, including many producing countries, are exacerbating the situation, pushing prices even higher.
Traditionally, producers have been at the mercy of the C market, forced to accept historically low prices that undervalue coffee, while buyers act as the “price makers”. This effectively puts importers and roasters in positions of power and can trap producers, especially smallholders, in cycles of poverty.
However, sustained high coffee prices are shifting these dynamics. Roasters and traders are under more pressure than ever as they struggle with cash flow management. This exacerbates the trend of market consolidation that has been a hallmark of the global coffee sector over the last five years.
Producers have more choice than ever
Higher arabica futures mean producers have greater leverage than ever. As such, they can choose from a wider range of buyers. For many, the option to sell locally for a higher price is more appealing than honouring less lucrative contracts.
Their intentions may be good, for instance, to reinvest later in their farms. Buying new equipment and replacing ageing coffee plants are necessary to improve quality and yields, which many producers have been unable to do after receiving consistently low prices for so long.
However, although lucrative in some cases, defaulting on contracts can create a number of problems for producers.
“There will always be some producers that try to renegotiate long-term contracts or abandon them in favour of short-term gains,” says Judith Ganes, the president of J. Ganes Consulting.
This can result in blacklisting and make it difficult for producers to secure future contracts. Additionally, defaulting can damage long-term relationships with roasters and traders built over years.
How is the specialty coffee market adapting?
Although it operates outside of the C market, specialty coffee is still impacted by record arabica futures. When the C price exceeds US $2/lb, roasters often panic, as it directly impacts their ability to maintain margins without raising consumer prices.
“The current market shifts are more related to conventional coffee than specialty, which is sold for a premium,” Judith explains. “If this differential remains firm at high prices, buyers might try to negotiate and lower the baseline as they hit their ceiling for what they can pay. They may seek out alternatives, which ultimately hurts the producer.
“There are other ways to negotiate contracts which include clauses that, in the event of an upside price swing, the buyer can secure positions as a form of protective insurance to lock in higher prices,” she adds.
Many roasters have expressed their shock at a US $4/lb C price, as it forces them to rethink sourcing strategies and pricing models. One of the ways they can achieve this is by offering more blends and sourcing from more cost-effective origins.
Specialty coffee importers also struggle with this shift in the market. Some have filed for bankruptcy, while others have been absorbed by larger players, who can then establish their own specialty divisions for a fraction of the cost.
This inversion of trade dynamics has created tension in the supply chain. If producers default on contracts in favour of higher returns, they can undercut long-term roaster and importer partners. At the same time, many view the price rally as an overdue win for producers who have long struggled with inequity in the value chain.
“Long-term contracts tend to be switched for short-term gains, but this is most common in supply chains without much transparency and trust,” says Bram de Hoog, the founder of producer-owned roasting collective Paso Paso Coffee. “Stronger supply chains with more transparency tend to be more resilient since the benefits are reaped over multiple years.
“There has been a mixed response from producers. Some raise their prices along with the C market, while others make smaller adjustments in order to maintain clients,” he adds. “In general, producers will seek to establish a new ‘base price’ which they can also return to in the future if the market does drop again.”
Relationships are now more important than ever
As the C price remains high, the gap between commodity and specialty coffee continues to narrow.
According to a new UN FAO report, it will take almost a year for consumers to feel the effects of price spikes, most of which will impact cheaper coffee sold in supermarkets and convenience stores, for example. The report states that up to 80% of these price rises will trickle down to EU consumers within the next 11 months – and to US consumers in just eight months. It also estimates that the residual effects of these price rises will last for four years.
Bram explains that within the specialty market, coffees scoring 82 to 84 points will be impacted the most, whereas prices for high-end micro lots are likely to stay relatively stable.
This spells a difficult period for roasters, who may transition to more cost-effective coffees to avoid raising their retail prices. It will also affect producers, many of whom grow coffees in the same range.
The specialty and commercial markets have always been somewhat interconnected. So, for the specialty market to continue on its upward trajectory, roasters need to practice what they preach.
“We will see more consolidation in the market than ever, and companies with deep pockets will come out on top,” Bram says. “Coping can only be done by adopting a long-term vision that stays close to your mission.”
In order to survive, specialty coffee brands need to leverage their values and relationships. Maintaining close connections with producers and other origin partners reduces risk and provides stability in a volatile market, which has never been more critical.
The coffee industry is at a turning point, and every supply chain actor needs to adjust accordingly. Volatility has never been more apparent, which means producers, roasters, and traders need to collaborate to mitigate higher levels of risk.
Prices will eventually come down, but these recent weeks have exposed how vulnerable the supply chain is. Looking ahead, those who invest in strong, valuable partnerships will be in the best position to cope.
Enjoyed this? Then read our article on how high coffee prices could go.
Photo credits: Paso Paso Coffee
Perfect Daily Grind
Want to read more articles like this? Sign up for our newsletter!