MercoPress. South Atlantic News Agency

FAO: Coffee production down brings prices up to all-time high

Unfavorable weather heralds a smaller coffee production in the long run

The United Nations Food and Agriculture Organization (FAO) released a report on Friday stating that global coffee prices hit a 13-year high in December last year, driven by reduced production in major exporting countries due to adverse weather.

“Following the high reached in February 2022, international coffee prices experienced a general decline, with a brief rebound in early 2023, before rising again from late 2023 and reaching their highest level in more than 13 years, in real terms, in December 2024,” the document read.

Arabica prices rose 58% and Robusta 70% compared to 2023, narrowing the price gap between the two varieties for the first time since the mid-1990s. Key factors included drought in Vietnam (20% production drop), excessive rain in Indonesia (16.5% decline), and unfavorable weather in Brazil, the largest Arabica supplier, leading to a downward revision of crop forecasts. Higher shipping costs also contributed to the price surge.

The FAO also noted that raw coffee price increases typically take about a year to reach consumers, with 80% of the impact felt within 11 months in the European Union (EU) and 8 months in the United States, though retail price rises are moderated by other costs like transport, roasting, packaging, certification and retail mark ups.

A 1% rise in raw bean costs led to a 0.24% retail price increase in the EU after 19 months, with effects lasting years. In 2024, consumer prices rose 6.6% in the US and 3.75% in the EU.

The FAO also warned of potential further increases this year if supply issues persist and underlined the need for investment in climate-resilient farming, as smallholder farmers, who produce 80% of global coffee, are heavily affected. Brazil and Vietnam account for nearly 50% of world coffee production.

In terms of producing countries, the prices for coffee bean growers rose 17.8% in Ethiopia, 12.3% in Kenya, 13.6% in Brazil, and 11.9% in Colombia, it was also explained. Higher shipping costs were also found to be one of the factors contributing to the increase in world coffee prices.

“The high prices should provide incentives to invest more in technology and research and development in the coffee sector - which relies largely on smallholder farmers - to increase climate resilience,” FAO’s Markets and Trade Division Director Boubaker Ben-Belhassen pointed out. In addition, the UN agency mentioned that climate change was impacting coffee production in the longer run. Hence, FAO supports many of the coffee-producing countries to help farmers adopt climate-resilient techniques that also contribute to restoring biodiversity loss.

The FAO also highlighted the importance of market transparency and encouraged cooperation among all actors of the value chain to support sustainable growth in the global coffee sector and protect the livelihoods of millions of smallholder producers worldwide.

(See also: Brazil: Coffee price expected to remain high )