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Global coffee crisis brews as soaring prices disrupt supply chains and rattle industry

by admin March 8, 2025
March 8, 2025
Global coffee crisis brews as soaring prices disrupt supply chains and rattle industry

The global coffee trade is facing an unprecedented crisis as soaring prices disrupt supply chains and force roasters to scale back purchases.

A 70% surge in Arabica coffee futures since November has left traders, roasters, and retailers grappling with uncertainty, with buyers unwilling to commit to large orders.

The situation has prompted major players to rethink their strategies as coffee warehouses remain understocked, and negotiations with retailers stall.

At the US National Coffee Association’s annual convention in Houston this week, traders and roasters warned that the supply crunch could have lasting consequences for the industry.

While higher prices typically indicate profitability for coffee producers, this time, buyers are reluctant to absorb costs, limiting the flow of coffee through supply chains.

Industry leaders now face difficult choices as they weigh the impact of prolonged volatility on global coffee markets.

Retailers push back as roasters cut purchases

Coffee roasters worldwide are reducing their purchasing volumes, with some unable to sell their expected annual production.

Renan Chueiri, director general at Ecuador’s ELCAFE C.A., noted that his company has only sold 30% of its projected output this year—an unprecedented situation.

Many buyers, he said, are struggling with liquidity and cannot afford to buy at current prices.

Retailers are also resisting price increases, making it difficult for roasters to pass on higher costs. Some supermarkets and grocery stores are delaying negotiations, leading to shortages on shelves.

A US-based roasting executive said some of his clients fear they will be unable to sell coffee at the new prices, forcing them to reconsider their business models.

In response to the crisis, traders are adopting cautious strategies.

Deals in Brazil, the world’s top coffee producer, are now conducted under stricter terms.

Buyers only pay after verifying the quality of the beans on-site, a shift that underscores the heightened risk in the market.

This conservative approach has slowed transactions and further strained cash flows across the supply chain.

Supply shortages force warehouse closures

The supply squeeze is evident at major coffee storage hubs in the US, where warehouses near ports are operating at half their usual capacity.

An executive from one of the largest storage firms noted that some companies are returning silos to their owners and terminating leasing agreements early due to the lack of stock. This signals a severe supply crunch that could persist unless production rebounds significantly.

As smaller traders struggle with financing constraints, industry consolidation is accelerating. Larger firms with deeper capital reserves are poised to expand their market share, while smaller businesses may be forced out of the industry.

Michael Von Luehrte, owner of broker MVLcoffee, expects trading firms with greater financial resources to increase their volumes, while those with limited access to credit could struggle to stay afloat.

Brazil’s harvest could end the price rally

Despite the current crisis, some analysts predict that Arabica prices may fall by 30% by the end of the year.

A recent Reuters poll suggests that demand destruction due to high prices and a potentially strong Brazilian harvest in 2025 could stabilise the market.

The expansion of coffee plantations in Brazil, India, Uganda, and Ethiopia may further contribute to a supply recovery, potentially reversing the price surge.

Commodities trader Louis Dreyfus highlighted that an abundant harvest in Brazil, combined with new planting efforts, could lead to a price collapse.

However, this depends on favourable weather conditions and sustained investment in coffee-growing regions.

The post Global coffee crisis brews as soaring prices disrupt supply chains and rattle industry appeared first on Invezz

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