Increase in green coffee prices and supply costs

It is inevitable that many consumers feel puzzled when they see the price of coffee rising on supermarket shelves or at the bar counter. However, when evaluating a price increase, people often do not consider that behind this rise lies a much greater sacrifice, involving the entire supply chain—from producers to distributors. A small price increase for consumers can, in fact, hide a much more significant rise in production costs, squeezing profit margins and putting all industry players to the test, from coffee growers to roasters and distributors. The reality of the coffee market is far more complex than it might seem at first glance, and every price fluctuation reflects a series of challenges that must be addressed on a global scale.

Why is the price of coffee rising?

The green coffee market has undergone significant changes from the pre-pandemic period to today, with price increases affecting not only the roasting sector but also the final consumer. Several factors, including climate change, rising global demand, logistical disruptions, and geopolitical tensions, have contributed to this steep rise in costs. In particular, the situation in the Suez Canal has had a significant impact on the supply of Robusta coffee, one of the most consumed varieties in the world, mainly sourced from Vietnam and India.

The surge in green coffee prices

Over the past five years, green coffee prices have reached record levels, peaking in 2024. Green coffee, which is primarily divided into Arabica and Robusta varieties, has experienced a significant cost increase in international markets.

• Arabica: In 2020, the average price of Arabica coffee was around 120 cents per pound. By 2024, this price had risen to 257 cents, marking a more than 100% increase compared to pre-pandemic levels.
• Robusta: The Robusta variety, mainly produced in Asian countries, saw an even sharper increase. Its price, which hovered around $1,200 per ton in 2020, rose to approximately $4,195 per ton in 2024, marking a more than 90% increase in just two years.

A multifactorial price increase

Climatic factors, geopolitical tensions, logistical complexities, and an increase in global demand have together created an environment of growing instability, leading to a progressive rise in costs that impacts the entire supply chain.

Climate change and resulting production difficulties

Climate change is having an increasingly significant impact on green coffee production, destabilizing the global market.

The main coffee-growing regions, such as Brazil, Vietnam, and India, have been affected by extreme weather events that have reduced both the quantity and quality of harvests. Prolonged droughts, especially in Brazil, have lowered agricultural yields, compromising plant development and reducing bean size and density. Additionally, late frosts, such as those that hit Brazil in 2021, severely damaged portions of crops, lowering quality and further reducing the supply of green coffee. Floods and intensified rainfall have also negatively affected logistical infrastructure, making transportation more difficult and expensive.

Rising global temperatures are also altering growing seasons, pushing coffee cultivation to higher altitudes, with negative consequences on plant yields and the availability of high-quality coffee. Despite producers’ efforts to adapt—such as adopting drought-resistant varieties and innovative agricultural techniques—climate change remains one of the main causes of coffee market instability, leading to a limited supply and rising prices.

Increasing demand

In recent years, global coffee consumption has seen a significant surge, especially in Asian markets, with China as a prime example. Over a decade, the country has experienced a 150% increase in coffee consumption, driven by a growing coffee culture and the expansion of coffee shop chains. These changes have transformed coffee from a traditional beverage into a symbol of modernity and lifestyle, also influencing other Asian countries such as India and Japan. The rising demand in these regions has put pressure on the global supply chain, which was already vulnerable to climate and geopolitical factors.

The growing demand has had a direct impact on the coffee market, contributing to price increases. Coffee plantations cannot quickly respond to such a sudden rise in demand, mainly due to limitations in production capacity and the difficulty of improving cultivation efficiency in a short period. The result has been a scarcity of available green coffee on the market, leading to a subsequent price surge as demand outpaces existing production capabilities. This demand increase, combined with external factors such as climate challenges, has further contributed to making coffee an increasingly expensive product, even for consumers in traditional coffee-drinking countries like the United States and Europe.

Supply chain disruptions and rising logistical costs

The COVID-19 pandemic had a devastating impact on global supply chains, with effects extending far beyond public health, affecting key economic sectors, including coffee. Transport and delivery disruptions were particularly significant, with port operation slowdowns creating a domino effect throughout the supply chain. Congestion at major seaports, combined with a limited number of available containers and labor shortages, led to massive shipping delays and increasing difficulties in ensuring timely deliveries.

Difficulties in transporting green coffee, which largely depends on maritime logistics, caused a rise in shipping costs—a phenomenon that directly influenced coffee prices. Container ships, often overloaded and unable to maintain usual schedules, drove up transportation expenses. This had a direct impact on the final price of green coffee, as producers and distributors had to cope with increasing costs for transporting raw materials, further exacerbated by a general rise in logistics-related expenses.

Furthermore, the scarcity of containers and the growing demand for transport have further increased logistical costs, leading to greater price volatility. The difficulty in sourcing green coffee, combined with these rising costs, has contributed to an unstable market environment, where coffee prices have seen continuous fluctuations. This has placed roasters and coffee traders in unprecedented challenges, inevitably affecting the final coffee price for consumers, pushing it upward.

The geopolitical uncertainty in the Suez Canal: a new factor of instability

The geopolitical uncertainty in the Suez Canal has proven to be a key factor of instability in global markets, with significant repercussions on the green coffee supply chain, especially regarding Robusta coffee from countries like Vietnam and India. This narrow maritime passage, connecting the Mediterranean Sea to the Red Sea, is one of the main logistical hubs for international trade and, therefore, for coffee procurement. Although the Suez Canal has been the scene of various geopolitical events over the years, recent developments have significantly increased its vulnerability.

The Suez Canal is vital for the transport of green coffee, which is shipped from Southeast Asian producing countries to European and American markets. However, geopolitical tensions in the region have caused greater instability, and military attacks, such as those carried out by the Houthi rebels in Yemen, have had a direct impact on trade flows. Armed groups in Yemen have often targeted vital shipping routes, threatening the security of vessels and slowing down transit in the Suez Canal. The potential for these areas to become the theater of broader conflicts increases the risk of disruptions in international trade flows and could lead to further increases in transportation and insurance costs, effects that inevitably fall on the final price of green coffee.

Attacks against shipping routes in the Red Sea and the possibility of temporary blockages in the Suez Canal are risk factors pushing companies to face uncertainties related to transit time, ship availability, and additional costs. The infamous Suez Canal blockage in March 2021, caused by the grounding of the Ever Given vessel, demonstrated how vulnerable canal traffic can be to interruptions. This incident had a global impact, interrupting the supply chain of many goods, including green coffee, and causing delivery delays that further pushed shipping costs to high levels.

In addition to attacks by armed groups, other geopolitical concerns, such as tensions between Middle Eastern countries and the increasing militarization of the region, are further factors of instability directly affecting trade flows. The political uncertainty in the Suez Canal brings with it the risk of conflicts that could damage the region's critical infrastructure, further slowing down transport and leading to unforeseen costs for green coffee producers and distributors. These geopolitical risks contribute to increasing market volatility, as industry players must deal with an increasingly fragile supply chain.

What to expect for the price of green coffee in the near future

The price of green coffee is expected to continue rising in the coming years, with projections suggesting a significant further increase in 2025. The main causes of this trend are related to the structural factors affecting supply and demand that we have discussed, and, in light of the news we have, they are far from finding mitigation or balance.

This scenario of increasing green coffee prices will necessarily have an impact on the price of coffee-based products on the shelves of both small and large distribution stores. With production costs continuing to rise, companies will have to deal with reduced margins, which will inevitably result in higher consumer prices. Forecasts indicate that 2025 could be the year when these increases will become evident even for regular consumers, with a possible price growth that will affect the mass-market coffee industry in a tangible way.

The coffee world: a sector under pressure

The rise in the price of green coffee over the past five years is the result of a multifactorial situation and a particularly challenging historical contingency, unfavorable for production and price containment policies. Market anomalies caused by the Covid emergency, climate uncertainty, rising global demand, logistical difficulties, and the extreme geopolitical instability affecting coffee routes have made the coffee market increasingly volatile.

Forecasts indicate that, unless sustainable solutions are found to address these challenges, prices will continue to rise, with direct impacts on the entire coffee supply chain.

Companies in the industry, from producers to roasters like us, will have to adapt to these new dynamics, exploring alternative sourcing strategies and adopting sustainable agricultural practices to ensure long-term stability.

The response to these challenges will determine the future of the coffee market and the accessibility of the product for global consumers.

Il Caffè Manaresi: Our commitment and our challenge in this five-year-long market contingency

At Il Caffè Manaresi, we are and want to remain a small artisanal roastery with small-scale industrial production capacity, thanks to our experience of over 130 years. We still manage to produce on demand without storing roasted coffee in warehouses, and we choose, roast by roast, only the coffee varieties that we believe stay true to our tradition in both quality and taste. We are not able to source directly from green coffee producers, but we procure from some of the best historical Italian distributors.

This is our strength but also our weakness at a time when all the costs across the coffee supply chain have increased and continue to rise. We have implemented minimal price increases that allow us to cover production costs without significantly altering the cost of the final product, currently with no possible profit.

We continue to produce authentic Italian coffee without compromises, with the extraordinary determination of our entire staff and the optimism we will never lose.