From morning brew to an afternoon pick-me-up, coffee is a ritual millions rely on daily. But lately, loyal coffee drinkers have noticed something bitter in their brew: prices are rising fast.
So, what’s causing the stir in the coffee market?
Arabica coffee futures, traded on the Intercontinental Exchange (ICE) in New York, have continued to climb, surpassing $4.00 per pound, reaching an all-time high in February, levels unseen since the 1980s. As the global benchmark for arabica coffee, this contract plays a key role in pricing for producers worldwide, making the recent surge a signal worth examining more closely.
Overall coffee consumption has grown by around 7% since 2020, reaching an estimated 177 million 60-kg bags in the 2024/25 period. While most coffee consumption still dominates in developed markets, led by the U.S., the European Union and Japan, there’s a noticeable shift underway. Countries such as China, Indonesia and Mexico are rapidly increasing their coffee imports, reflecting changing preferences and the growing popularity of coffee in emerging markets. Although these nations currently account for a relatively small share of global coffee imports, their import volumes are expanding quickly, signalling significant future potential as coffee culture spreads and consumer demand expands. China, in particular, is drawing attention as over the past decade, coffee consumption has surged by nearly 150%, additionally, total coffee imports tripled to 5.5 million bags and are forecast to reach 5.6 million in 2024/25.
Arabica coffee beans are the most widely cultivated coffee species, making up 60-65% of global production, with Brazil alone contributing about 38% of the world’s total supply. However, fears of a coffee shortage have intensified as Brazil faces its driest weather in decades. The extreme heat and lack of rainfall in key growing regions threaten harvests. Thus, Brazil’s arabica output is expected to decline by 12.4% in 2025, falling to an estimated 34.7 million 60-kg bags. Robusta coffee appears to be under similar pressure. Vietnam, the world’s largest producer of robusta, has experienced a damaging mix of prolonged drought followed by intense rains during harvest. Since Brazil and Vietnam together supply roughly 56% of the world’s coffee, simultaneous disruptions in both countries are likely to have a significant strain on the global coffee market.
Additionally, the recent U.S. trade policy has added another layer of uncertainty to the coffee market. For decades, the U.S. (the largest coffee importer worldwide) has imported coffee tariff-free, relying heavily on foreign supply since domestic production is limited to small-scale operations in Hawaii and parts of California. However, coffee imports from major producers are currently subject to the 10% baseline tariff as higher rates are paused temporarily.
The supply-demand imbalance has already pushed prices up to a multi-decade high, which has been further fueled by commercial buyers increasing purchases to protect themselves against potential shortages and trade policy risks.
Investors looking to gain exposure can consider commodity-focused exchange-traded funds, such as the WisdomTree Coffee ETF, which mirrors the performance of the Bloomberg Coffee Index. This index tracks the price movements of coffee futures contracts traded on commodity exchanges. Over the past year, the WisdomTree Coffee ETF has surged by 109.9%. Alternatively, shares in major coffee producers and global coffeehouse chains can offer indirect exposure with added business diversification. Honourable mention goes to Kalve Coffee, one of Latvia’s leading specialty coffee brands, which launched its IPO in November on the Nasdaq First North exchange- an exciting local opportunity.
That said, it’s worth noting that investing in commodities like coffee comes with high risk and is typically not considered a long-term investment, thus, coffee should be treated as a tactical allocation within a broader diversified portfolio.
– Justine Ieva Aboltina
