Coffee Prices Soar as Extreme Weather Hits Brazil & Vietnam

Ongoing weather issues in key coffee producing nations is continuing to push up prices, a leading business analyst says.

Since the start of the year, coffee prices have increased by over 30%, and by 63% since November 2023. 

Kanica Goel, Senior Analyst at business intelligence specialist The Smart Cube, says extreme weather in Brazil and Vietnam is to blame. The two countries together account for 55% and 50% of global coffee production and exports respectively.

Goel points out that in March, Brazil's Minas Gerais region – which accounts for 30% of the country’s arabica crop – received 235% more rain than i average for the time of year. 

“Then in April it received no rainfall and this has carried on into May, and is damaging coffee crops in the country.”

Meanwhile, In Vietnam – the world's largest producer of robusta coffee beans – drought is likely to cause a 20% year-on-year  drop in coffee production. Goels says this could lead to the smallest crop in the past four years.

An intense heatwave is sweeping through Southeast Asia, and maximum temperatures in parts of northern and central Vietnam have ranged from 40-44 degrees Celsius.

Coffee supplies hit by extreme weather in Brazil, Vietnam

Reuters reports that coffee farmers in Vietnam have sharply increased use of irrigation in the main coffee producing regions in the face of drought, but are now running low on water.

Goel adds that in February, robusta coffee inventories fell to a record low, while arabica coffee stocks were at a 24-year low.

Restricted supply has seen coffee prices soar, with coffee chains and producers passing costs onto consumers. In London, some coffee shop chains are charging customers more than £5 for a takeaway coffee.

Goel adds that port congestion, shipping delays and geopolitical unrest “is further aggravating supply concerns and is supporting the price hike”. 

She says: “What’s more, ongoing supply apprehension arising from the excessive dryness in Brazil and Southeast Asia is prompting investors and traders to increase short coverings, which might keep prices elevated in the next one-two months.”