Why Coffee Prices are Dropping as Supply Chains are Restored

After facing low harvests and high prices in the spring, coffee prices are dramatically decreasing.

Ripples are being seen throughout the supply chain, following a period of unpredictable crop yields and unstable consumer prices.

Production is predicted to increase over the next three years, easing concerns to farmers and investors and resulting in rapid price drops of Arabica and Robusta coffee beans.

This could see a return of more products on the shelves and lower prices for consumers. 

The climate effect

Despite facing a record high of US$4.30 per pound in February, arabica coffee is now priced at US$2.80 per pound. Similarly, its cheaper counterpart, robusta, was trading at US$2.75 per pound in February, and is now at US$1.73 per pound.

Smallholder farmers who depend on stable prices and stable harvests for their livelihoods will bear the brunt of this shift, though the effects will be seen throughout retailers too. 

Brazil experienced 110,000 wildfires, burning through 114,000km2 between January and August in 2024. In June, Brazil also experienced large-scale floods. 

The effect climate change is having on countries and their agriculture cannot be underestimated. As weather acts unpredictably, crops get damaged or cannot grow to their full potential.

As a result, yields are lessened, and production slows.

The reduction in coffee production can be, to some extent, equated to these climate issues, and will continue to occur if the climate remains unstable. 

The International Coffee Organisation (ICO) Executive Director, Vanusia Nogueira comments: "I think (the end of the deficits) will depend a lot on this climate issue." 

As a result of dramatic weather conditions, crop yield decreased, and prices rose dramatically. This was seen throughout global coffee suppliers. 

Vietnam is the largest producer of robusta coffee, and the increased prices last year–followed by the drop this year–can be attributed to unpredictable yield.

In the 2023/24 crop year, Vietnam experienced drought. This resulted in the smallest crop in four years, with a 20% drop to 1.472 MMT (million metric tonnes). 

Production uncertainty 

Vietnam is still producing at a deficit, and the Vietnam Coffee and Cocoa Association is now predicting a 2024/25 production estimate of 26.5 million bags in comparison to a prior prediction of 28 million. 

Supply chain uncertainty has already been seen across the shelves, as Nescafé has been experiencing supply issues with its Frothy Coffee range.  

Nescafé said "unforeseen circumstances" were causing stock issues across the whole range. A spokesperson commented: "We are sorry to say that we are facing a short-term disruption to the production of our Nescafé frothy coffee range.

"We're working hard to get consumers' favourite products back on shelves as quickly as possible. We currently expect to be back to full availability from the beginning of August, although you should start to see some of the range, including Cappuccino, back on shelves sooner."

Steps forward

Despite the uncertainty, however, there is a worldwide anticipation of increased coffee supply over the next three years. 

The USDA predicts the deficit will end there, with an estimated Vietnamese robusta production of 30 million bags in the 2020/26 crop year–a 4-year high. 

New coffee plantations have begun production in Brazil, with the expectation of meeting supply pressures over the next few years. 

"These are plantations that will start producing in about three years, so then, in three years, we should have some additional supply,” adds Vanusia. 

The USDA’s Foreign Agricultural Service (FAS) predict Brazil’s 2025/26 coffee production will increase to 65 million bags, and Vietnam’s 2025/26 coffee supply will rise to 31 million bags. 

This will result in a price drop across the supply chain, but should bring production back up to expected levels, meaning there will be less uncertainty around prices.

This, in turn, allows for a more stable and sustainable income throughout the supply chain.

With new plantations cropping up, and plans in place to meet coffee production expectations, supply chains should see a more stable line in the near future.