Why is the price of coffee rising so much?

FRAN GONZÁLEZ, COFFEE DIRECTOR

In recent months, we have witnessed a historic increase in the price of Arabica coffee on the international market, which has reached highs of up to 70% not seen in decades. This phenomenon affects producers, roasters, importers and, ultimately, consumers. Why is this happening?

The reasons

This large increase in prices is the result of a perfect storm of factors, something that has not occurred since 1977, and they are as follows:

- Extreme weather in Brazil. Brazil, the largest Arabica coffee producer, has faced prolonged droughts and unexpected frosts that have significantly reduced production. If Brazil suffers, the entire market suffers.

- Logistical problems. The weather is not only the worst thing that has happened to Brazil. Congestion at its ports has taken its toll, and the same has happened in Panama, with serious transport delays that have made logistics more expensive.

- Global price increases. Energy costs have risen, high interest rates are increasingly common and, to top it all off, geopolitical tensions have affected the entire supply chain, both producers and end consumers.

- Speculation in the futures market. Speculators, attracted by volatility and predictions of shortages, are betting heavily on the futures market. These massive investments generate additional increases in the "C Price", amplifying the impact on the entire chain.

In January 2025 we will have news: by then the crop forecasts in Brazil will have been calculated and prices in the futures market will be recalculated.

How we weathered the price storm at NOMAD COFFEE

In these 10 years, NOMAD COFFEE has never looked at the futures market price to calculate our prices: we have always paid well above the average price set by the market.

However, this year we had no choice but to keep an eye on this ever-increasing figure. Something we had never seen before happened: at some point on November 28, the market price exceeded the price we had agreed in advance with two of our producers with whom we have direct commercial relations, Diego Robelo (Entre Ríos, Costa Rica) and Carlos Pola (Las Brisas, El Salvador).

Indeed, NOMAD COFFEE is very proud of our direct relationships with producers. This has created a bit of stability in the midst of all this storm as our producer partners will continue to respect the previously agreed price, always with the promise on our part to improve the price year after year, as we have always done so far.