We’re at a pivotal moment in the coffee industry. For the first time in its history, the arabica futures market is over US $4.30/lb.
This unprecedented high – primarily due to supply shortages in Brazil, dwindling global stockpiles, and the fallout from US President Trump’s tariff threats – has sent shockwaves through the coffee sector. But some believe this has been a long time coming, especially with the climate crisis worsening.
Until Brazil and Vietnam, the world’s two biggest coffee growers, produce good harvests (which may not happen until mid-2026) or demand in consuming markets drops significantly, prices are expected to keep climbing. This news could cause traders and roasters to panic buy, driving prices even higher.
This is a turning point for the coffee industry. Roasters and traders now face increasingly tough decisions, and the consequences will trickle down to consumers. However, there is a silver lining: An opportunity to engage with customers about the value of coffee, potentially creating a more equitable supply chain for producers in the long term.
I spoke to Adam Pesce, president of Reunion Coffee Roasters, and Alejandro Cadena, co-founder and CEO of Caravela Coffee, to find out how roasters and traders can navigate the challenges ahead.
You may also like our article on what will change for roasters in 2025.
Unprecedented coffee prices are reshaping the industry
Last year was a historic one for the coffee industry. Following reports of dwindling supply in Brazil and Vietnam and uncertainty about the EU’s deforestation regulations, arabica futures surged to their highest levels since 1977, marking a 70% increase.
Less than two months into 2025, all the signs point to the start of a new era for coffee: One where high, volatile prices are becoming a reality that roasters and traders can’t afford to avoid.
“The rise in coffee prices on the futures market was not entirely unexpected, although the timing and the speed of the increase have been surprising,” says Alejandro Cadena, CEO and co-founder of specialty green coffee trader Caravela Coffee. “The underlying causes of this price surge have been evident for some time and closely mirror those driving the sharp increase in cocoa prices last year.”
Both coffee and cocoa are sensitive crops that require specific temperatures, rainfall, and soil conditions to produce good yields and quality. Coupled with rising global demand, the worsening climate crisis has caused production and stockpiles to dwindle rapidly.
“This vulnerability has been building for years, and we are now seeing its consequences play out in real-time,” Alejandro says.
The last record high for arabica futures was US $3.39/lb in 1977, following a severe frost in Brazil, the world’s biggest producer. This record, adjusted for inflation in 2025, is around US $17.55/lb. Although the C price is far off this number, it underscores the significance of its sharp upward trajectory.
“The frost-induced flip in 1977 crashed global coffee consumption, which suddenly meant that there was a glut of coffee on the market. Prices then started to come down, and the market settled, but the situation we’re in now isn’t like that,” says Adam Pesce, the president of Reunion Coffee Roasters and a board member of the Coffee Association of Canada.
“This was not precipitated by a single event; it’s a bad supply-demand market being pushed to the limit by a long speculator position and a short commercial position.”
Market dynamics are adding more pressure
Historic prices are creating a profound shift in the coffee value chain. Many in the industry reiterate that farmers, often at the mercy of low market prices, are benefiting as they become price makers rather than takers.
But the higher costs of fertilisers – a result of the ongoing Russia-Ukraine conflict – and farm workers’ wages mean many may only break even. Moreover, market volatility could quickly reverse any gains, exposing their vulnerability and significantly impacting their mental health.
Roasters that haven’t hedged their future coffee purchases (meaning they haven’t locked in defined coffee prices in advance) face sharp, immediate price increases. Most operate with short-term positions, so they are quickly impacted by market fluctuations.
“Over the past year, many roasters have stayed on the sidelines of the market, waiting for prices to drop to purchase or contract coffee. However, this short positioning only exacerbates the situation. As their expectations haven’t materialised, and prices have continued to climb, roasters have had to capitulate,” Alejandro explains.
“Now, they’re in a vulnerable position, with low inventories, soaring prices, and mounting pressure to secure supply. Further delaying purchases only increases their risk exposure. In times of uncertainty, waiting is not a strategy; it’s a gamble.”
Traders, in particular, are navigating an increasingly challenging market with higher interest rates, rising coffee prices, and lower profit margins. Throughout 2024, a wave of consolidation disrupted the green coffee trade sector as larger players absorbed struggling smaller operations.
“Traders have already been forced to adopt a much more conservative approach than usual. The combination of an inverted futures market, rapidly rising prices triggering margin calls, tight financing conditions, and a high-interest rate environment has significantly constrained their ability to hold large inventories,” Alejandro says.
“To mitigate risk, they are limiting their exposure, reducing inventory levels, only doing back-to-back contracting, and prioritising quick turnover rather than stockpiling coffee. With high financing costs and volatility showing no signs of easing, the focus of most traders has shifted to managing liquidity, minimising capital exposure, and securing only the most strategic purchases.”
But this only adds further strain to an already tight supply chain, compounded by buyers’ unwillingness to commit to purchasing coffee while prices remain high.
“Part of their business is to hedge our risk and borrow against future coffee sales. Because they’re short on contracts and roasters don’t want to fix prices at this level, it creates a huge gap in the market,” Adam tells me. “This puts immense pressure on importers and exporters. I think we’ll see some industry players fail in this environment unless the market crashes or roasters finally accept prices at these levels.”
Tough decisions lie ahead for the coffee industry
Changing market power dynamics have sparked important conversations about the value of coffee. For an industry that reaffirms that producers should receive more money, record arabica prices should be ideal. The reality, however, is much more complicated.
“This will test the elasticity of coffee. Roasters, traders, and coffee shops shouldn’t absorb these costs; they need to be passed down to the consumer. That’s just good business practice,” Adam says. “Or people stop drinking coffee because the price becomes too expensive, and that’s when we find the breaking point.
“We’re not there yet, but maybe this is a test. Maybe US $4/lb becomes the new normal.”
Market volatility is cyclical – prices won’t rise or fall forever – but all-time highs will undoubtedly reshape the coffee industry over the next few years. All supply chain actors, including consumers, will need to adapt to a new era of pricing.
“Roasters that continue to hold off hoping for the market to crash may find themselves either without coffee when they need it most or forced to buy at even higher prices in an already unpredictable market,” Alejandro says. “Unless they have the capital and cash flow to absorb rising costs without passing them on to consumers, they will have no choice but to increase retail prices.”
Industry analysts anticipate that retail coffee prices will increase by up to 25% over the next few months, forcing roasters to make tough decisions. Given rising costs across the board, higher prices will further strain consumers’ wallets.
Pushback on higher prices is to be expected. Coffee and bakery chain Pret A Manger recently capped its monthly subscription fee at £5 (US $6.25) following the backlash over proposed plans to double the costs.
How could coffee consumer behaviour shift with higher prices?
With price hikes on the horizon, consumer behaviour will start to change. This is undoubtedly a cause for concern for roasters and coffee shops, and it will require a shift in strategy to remain competitive.
“Historically, coffee has shown price inelasticity, meaning consumers rarely stop drinking it altogether when prices rise. Instead, they adjust their purchasing habits to minimise the impact,” Alejandro says. “According to ICO statistics, coffee consumption worldwide has increased from 105 million 60kg bags in 2000 to 177 million bags in 2024, driven by demand from younger consumers – and there is no sign that this will change anytime soon.
“One common response is a shift to at-home consumption, as consumers switch to brewing coffee themselves rather than purchasing from cafés,” he adds. “Additionally, there is often a greater demand for private labels and value brands as cost-conscious buyers look for more affordable alternatives.”
The sharp increase in at-home consumption during the pandemic means more consumers have both the skillset and equipment to prepare their own coffee, inadvertently preparing the industry for the challenging times ahead.
“It’s not a bad thing for people to drink more coffee at home if they buy it from your shop,” Adam says. “Roasters will need to focus on their retail offerings; be the place where people buy their coffee from.”
For specialty coffee roasters, this means emphasising their value proposition. While paying higher prices for coffee can be initially off-putting, consumers also don’t expect quality to drop. Specialty brands then have an opportunity to demonstrate their commitment to quality offerings, tapping into the demand for brand authenticity during challenging times.
Is there an opportunity to communicate the value of coffee?
Mainstream media outlets have continued to report on rising coffee prices, with claims of $10 lattes that could turn coffee into a luxury item. Many reports lack the supply chain knowledge to explain the current market conditions in sufficient detail, oversimplifying the challenges that lie ahead.
“The media’s sensationalism around rising coffee prices can create panic among consumers, but roasters can assertively take advantage of the unique opportunity to educate them on the true value of coffee beyond just price,” Alejandro says. “To do this successfully, roasters should clearly communicate why prices are rising, linking it to climate challenges, supply chain disruptions, and producer sustainability rather than just market speculation.”
Others, however, remain sceptical.
“The technical commodity side of what’s happening to coffee prices is difficult to understand, especially if you’re a casual news reader,” Adam tells me. “A lot of the stories focus heavily on climate change, which shouldn’t be discredited, but the overall situation is more complex than that.
“Moreover, many consumers simply don’t want to be more connected to origin. We have all the information about the coffees we buy, so it’s available to consumers, but there’s little interest,” he adds. “We put QR codes on bags of coffee, but so few people scanned them.”
The coffee industry has proved its resilience, navigating a number of challenges over the last few decades. The Covid-19 pandemic, the most recent example, underscores how agile and adaptable the supply chain can be during the most difficult times.
Nevertheless, a US $4.30/lb C price signals a new era for the coffee industry, one where pricing strategies will have to change. With no signs of the market slowing down anytime soon, roasters, traders, and consumers all need to adjust for the foreseeable future.
Enjoyed this? Then read our article on why market volatility won’t slow down in 2025.
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