Will Kletter is VP operations and strategy at long-range weather forecasting and ag insights platform ClimateAi.
The views expressed in this article are the author’s own and do not necessarily represent those of AgFunderNews.
Coffee drinkers around the world are facing a bitter reality: the rising cost of their daily cup of caffeine.
In December, futures of Arabica coffee — the most popular variety prized for its smoother taste and higher quality — hit their highest level in nearly 50 years. In September, Robusta coffee — the second-most traded variety known for its strong, bitter flavor — reached a record high on the ICE-LIFFE futures exchange and currently trades up 93%on the year.
The key drivers are two-fold: the world’s two largest coffee producers, Brazil and Vietnam, experienced drought and heavy rain [respectively] during critical growing and harvest periods; and demand for the drink, particularly in emerging markets such as China and India, continues to grow.
But this most recent price increase is not an anomaly. Severe weather conditions have strained supply chains and challenged traditional procurement models over the last decade, ultimately driving up coffee prices.
Extreme weather is now the norm
Globally, droughts, frosts, and heat waves are becoming recurring threats, disrupting the delicate balance required for coffee cultivation. Brazil, which accounts for roughly 40% of global coffee production, exemplifies the fragility of this balance. The country’s reliance on Arabica beans, which are highly sensitive to climatic changes, only amplifies the risks.
In 2015, for example, Brazil’s coffee belt was hit by one of the worst droughts in decades and crop yields dropped significantly. Prices then jumped almost 100% compared to the previous year.
In the years since, just the mere perception of risk has been enough to drive volatility.
During the 2023-2024 growing season, for instance, Brazil experienced a heat-drought event that had a limited impact on production volumes compared to 2015. Nevertheless, market fears about potential shortages triggered significant price increases as buyers scrambled to secure their supply.
Will coffee become a luxury?
These reactions reveal a critical truth: the market is becoming more and more attuned to the effects that extreme weather events can have on commodities like coffee. Such sensitivity introduces a layer of volatility that extends from producers to consumers, who ultimately bear the cost of higher prices. As extreme weather becomes more common, questions arise about the long-term affordability of coffee and its accessibility to the average consumer.
The stakes are particularly high for Arabica coffee, which constitutes approximately 80% of Brazil’s production. Arabica is more sensitive to rising temperatures compared to Robusta and is especially vulnerable during key growth stages such as flowering and fruiting.
For instance, during flowering, water stress can result in incomplete fruit development, directly reducing yields.
In a context where projections suggest that up to 50% of land currently suitable for coffee cultivation could become unviable by 2050, the urgency to address these vulnerabilities cannot be overstated.
Handling volatility
This last October offered a glimpse into the challenges ahead. An ongoing drought in Brazil raised alarms about potential supply shortages. At ClimateAi, we saw a medium risk of drought during this month, which falls during coffee’s typical flowering season.
While fears stoked market concerns, we were able to predict through data forecasting an easing of the drought in November — which empowered stakeholders to make informed decisions about price pressures amid subsiding weather conditions.
As shifting weather patterns continue to wreak havoc on the market, adaptation strategies will be essential to ensure the resilience of coffee production. Producers,
investors, and governments must prioritize the development and adoption of adaptive agricultural practices. Diversified sourcing, for example, can help mitigate risks associated with overreliance on a single region such as Brazil.
Collaborative efforts across the supply chain—from farmers to distributors—will also be critical in addressing the unpredictability of global coffee production.
While the challenges facing coffee producers are formidable, they also present opportunities for innovation and collaboration. By embracing forward-looking solutions and fostering greater cooperation across the industry, it may be possible to mitigate the risks posed by a changing climate and secure the future of coffee.
Brazil’s experience serves as both a cautionary tale and a call to action, reminding us that the stake extend far beyond any single harvest.
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Author Will Kletter
