In the last 12 months we have been seeing a continuous rise in coffee prices. Last August was the tenth consecutive month of rising prices, reaching values unseen in the last years.

Many people have been asking us what is happening with this commodity’s prices, one of the most important in international trade.

Overall increase in commodity prices 

Prices of agricultural commodities in general (not only coffee) have been rising due to the supply chain disruption caused by Covid-19. Many other important commodities, such as iron, copper and oil, are also in a bull market.

Global logistic mismatch

Changes in consumption habits (due to Covid-19), which affect producing and consuming countries differently, have a direct influence in the international trade of goods and are leading to a scarcity in both commodities, intermediary products and finished consumer goods.

This leads to a continuous increase in transport prices. Moreover, the global lack of shipping containers causes constant delays in the transport of goods.

The current international situation in terms of logistics is far from what it used to be before Covid-19.

Brazil is the world’s largest coffee producer and exporter, followed by Vietnam and Colombia. Keeping this in mind, any situation that affects the Brazilian coffee production will have an impact on the international market.

In the past month of July, Brazil was exposed to a cold snap that caused severe frosts, leading to great losses in coffee plantations and putting future harvests in jeopardy.

It is estimated that 8-11% of the arabica crop might be lost, a truly significant amount, considering the millions of bags produced in this country.

This situation, coupled with the uncertainty regarding the future of coffee production, caused the coffee price in the New York exchange to rise 20% in only 3 days.

But Brazil is not the only producing country suffering this year.

Vietnam is facing enormous challenges in performing its shipments. East Asia has been subject to the world’s sharpest increase in logistic costs, which in some cases are 10 times higher than a year before.

Adverse climatic conditions in some of the other main producing countries and the political situation in Colombia, with protests having taken place in May and June, are additional factors that, according to experts, have triggered this accentuated increase in international coffee prices.

The current coffee prices are a result of combining multiple social, climatic and geopolitical factors. The latter have led the sector to expect both a decrease in future production and an increase in demand due to the alleviation of the restrictions imposed by governments during Covid-19.