Global coffee traders and roasters have drastically reduced their purchases as the industry grapples with a sharp surge in prices that has yet to be absorbed by retail markets. At the U.S. National Coffee Association’s annual convention in Houston this week, attendees expressed shock at the 70% increase in Arabica coffee futures since November, marking a significant spike in global coffee prices.
Renan Chueiri, Director General at ELCAFE C.A. in Ecuador, revealed that this year marks the first time the company has not sold its expected annual production by March. Typically, the company would have sold out by now, but only 30% of production has been sold thus far. “The significant price hikes are affecting clients’ cash flow. They simply don’t have enough capital to buy the necessary quantities,” Chueiri explained.
The surge in coffee prices has been attributed to a decline in production in key coffee-growing regions, particularly Brazil, the world’s largest producer. This shortage of beans has led to a tight market, with many traders opting for short-term, cautious purchases. “Nobody wants to be exposed, nobody is buying for future delivery; it’s all hand-to-mouth,” said a coffee broker, speaking anonymously due to the sensitive nature of the situation.
The broker explained that transactions in Brazil are now being conducted with extreme caution, where deals are finalized within seven days, with buyers inspecting the quality of the beans before payment. “You close a deal, check the quality, and make payment on-site,” the broker said.
Despite the short-term challenges, there are expectations that prices could decrease in the second half of the year. A recent poll indicated that Arabica coffee prices might fall by 30% by the end of 2025 as high prices dampen demand and early indications suggest a large harvest in Brazil next year.
However, until prices experience a significant drop, much of the coffee industry is facing financial pressure. The CEO of a major U.S. roaster, the largest coffee-consuming market in the world, warned that some clients may struggle to remain in business. “They don’t know if they can continue to operate at these new price points,” he stated, also requesting anonymity. Supermarkets and grocery stores have been reluctant to accept the higher prices demanded by roasters, and negotiations have been slow. Some retail outlets are already facing empty coffee shelves.
“It has been a nightmare,” the CEO added, describing the difficult circumstances.
Meanwhile, coffee warehouses in the U.S. close to major ports are operating at half their normal capacity. One executive in the storage sector noted that some companies are returning silos to their owners and canceling leasing contracts early due to reduced demand.
Michael Von Luehrte, owner of the broker MVLcoffee, suggested that the current market turbulence could lead to consolidation in the industry. Larger companies with more financial resources will likely be able to increase trading volumes, while smaller players could face financial hardship and reduced access to capital.
During the conference, commodities trader Louis Dreyfus highlighted the expansion of coffee planting areas in response to rising prices. Countries like India, Uganda, Ethiopia, and Brazil have increased their coffee cultivation. The company believes that if Brazil experiences a substantial harvest, coupled with these new planted areas, coffee prices could collapse in the coming years.
As the coffee industry navigates these turbulent times, much remains uncertain. The market’s future will depend on a combination of factors, including the Brazilian harvest, retail market reactions, and the ability of roasters and traders to adapt to the shifting landscape.
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