Throughout 2024, rising coffee prices have been a recurring news story, driven by a powerful confluence of challenges that have significantly reshaped the market.
From fluctuating C-Prices and extreme climate events to logistics disruptions and new EU regulatory frameworks, the coffee industry has faced significant change in the last twelve months. Across the supply chain, specialty coffee producers and buyers have grappled with the complex task of balancing fair premiums with rising costs, while consumers adjust to higher prices at the café and retail level.
This blog takes a more detailed look at these challenges, and how they have impacted green coffee prices.
A refresher on the C-Price
The C-Price, or Coffee Commodity Price, is the benchmark market rate for green arabica coffee - the raw, unroasted coffee beans that make up a significant portion of global coffee trade.
The C-Price is a constantly fluctuating figure determined on the commodities exchange in New York, serving as a baseline price for contracts involving 100% arabica coffee. While it is fundamental to the global pricing of coffee, the C-Price does not account for the complexities of how coffee is bought and sold, including futures contracts, price adjustments based on origin or quality, and financing arrangements.
Crucially, the C-Price reflects no consideration of quality. It sets a "floor price" but doesn’t differentiate between a coffee bean that meets the bare minimum standards and one of exceptional quality.
Why Does the C-Price Affect Specialty Coffee?
Specialty coffee is a unique market within the broader coffee industry.
Defined by its physical quality, flavour profiles, and sustainable and ethical production practices, specialty coffee requires more care and investment at every stage of production. From precise farming techniques to meticulous post-harvest processing, producing high-quality coffee involves significant effort and expertise. This means that the cost of production for specialty-grade coffee is therefore inherently higher, and producers invest significant time, skill, and resources per kilogram of coffee.
For specialty coffee to exist, there must be a clear financial incentive for growers. This is achieved by paying prices well above the C-Price - prices that reflect the premium quality, and the positive social and environmental practices involved in production.However, the C-Price still impacts specialty coffee. When the baseline C-Price rises, the price of specialty coffee generally increases proportionally. This relationship exists because buyers and roasters use the C-Price as a reference point, adding premiums on top to account for quality and sustainability.
Without sufficient premiums, producers would lack motivation to invest in the labour-intensive practices required to create specialty-grade coffees.
At the beginning of 2024, the C-Price hovered between $1.80 and $1.90 per pound. The industry initially anticipated that the price would remain in this range throughout the year, barring significant disruptions to supply and demand.
Unfortunately, there were a number of events that happened in 2024 that have impacted the wider market. Continue reading to find out more.
One of the most impactful factors has been climate change, which is causing more frequent and severe weather events in coffee-producing countries each year. These extreme conditions are not only damaging crops but also affecting both the quality and quantity of coffee harvested.
Brazil, the world's largest coffee producer, was hit by its most severe drought in 70 years, which caused a significant impact to harvests across the country. As Brazil accounts for roughly a third of the global coffee supply, this shortage has created significant challenges in balancing global demand and supply. The effects of the drought aren’t just limited to the current harvest—experts predict that it could also influence next year’s coffee production, further tightening supply.
Similarly, Vietnam, the second-largest coffee producer globally, has been grappling for 3 years with ongoing drought conditions that have negatively impacted its coffee crops. While Vietnam is best known for producing Robusta coffee, a variety that is used in large amount of instant coffee production, the drought has had a ripple effect across the market. Robusta shortages mean that large commercial coffee companies are increasingly turning to low end Arabica coffee to meet demand.
In 2024, coffee supply chains around the world have been hit hard by rising logistics costs, fuel price fluctuations, and geopolitical tensions. Fuel costs, which make up about 30-40% of shipping expenses, spiked due to ongoing issues such as the war in Ukraine and tensions in the Middle East which has pushed freight prices up.
On top of that, rerouting shipping lanes to avoid conflict zones not only added more time to shipments but also increased the overall cost of transporting coffee. For example, coffee exports out of Ethiopia crawled to a stop this year due missile and drone attacks, targeting shipping vessels in the Red Sea area, by Houthi forces based in Yemen.
Things got even tougher with container shortages and longer transit times, which put further strain on the system and pushed up costs. In major coffee-exporting countries like Brazil and Vietnam, logistics now account for 15-20% of the final price of the coffee.
Coffee producer, Nestor Lasso, on his farm in Huila, Colombia. Origin partner since 2021.
The EU and Deforestation Laws
The European parliament passed laws to limit deforestation around the world, by restricting the import of goods (including coffee) that contribute to deforestation. This means that the land used for coffee production must have not undergone deforestation since the cut-off date of 31 December 2020. Deforestation is defined as the conversion of forests into agricultural land. Deforestation-free includes land that is free from forest degradation.
The issue for the coffee industry has been the process of certifying coffee to be deforestation free is not possible in many producing countries due to the process. For example, in east Africa most coffees are produced by millions of small hold farmers whose lots are on average a hectare in size. To individually certify every lot and maintain the certification is not feasible in the current form of the laws. This means European coffee roasters, which include some of the world’s biggest, have been buying up raw coffee stocks to stockpile them prior to the end of the calendar year when the laws go into effect.
In the United States, the recent presidential election has brought uncertainty to international trade policies, prompting large coffee roasters to take proactive measures.
Anticipating the possibility of future tariffs on imported coffee, many of these companies have begun stockpiling coffee beans to safeguard against potential price increases or supply chain disruptions. This strategic move reflects a broader concern about trade relations and the impact of geopolitical changes on the coffee industry.
The culmination of all of this is that the cost of coffee has reached highs not seen in Australia for 50 years.
While the Arabica coffee futures price has previously surged, such as during 2010-2011 when it entered the $3 USD per pound range, the impact was less pronounced in Australia due to the Australian dollar being at parity with the US dollar at that time. This parity softened the blow of higher coffee costs for Australian roasters, cafes and consumers.
With the Australian dollar currently trading at around 64-65 US cents, the impact of coffee price increases is almost double compared to the last major spike.
Gitesi Washing Station, Rwanda. Origin partner since 2021.
This year, coffee pricing has been profoundly reshaped by economic, environmental, and geopolitical pressures. At Padre Coffee, we understand that these challenges go beyond rising costs—they affect the livelihoods of farmers, the quality of coffee, and the experience we provide to our customers.
We’re tackling these issues by prioritizing long-term relationships with producers, offering fair and sustainable premiums well above the C-Price to ensure they can continue producing specialty coffee despite rising costs. Transparency remains at the heart of what we do, and we are dedicated to educating our customers about the journey behind each cup, fostering a deeper appreciation for the defining aspects of specialty coffee.
Padre Coffee acknowledges the Traditional Custodians of Country throughout Australia and their continued connections to land, sea and community.
We pay our respect to Elders past, present and future, and extend that respect to all Aboriginal and Torres Strait Islander Peoples.
