When you think about coffee, countries like Brazil and Colombia, known for producing excellent Arabica coffee, usually come to mind. While there are differences between the two, and there’s friendly competition to determine the best, Colombian coffee stands out as one of the country’s most iconic products. In fact, it’s deeply ingrained in local and international culture.
However, Colombian coffee faces a significant price increase not due to quality or exclusivity but because of external factors impacting buyers and producers. This coffee crisis is largely attributed to a severe drought and geopolitical issues. Unfortunately, the future doesn’t look promising for Brazilian and Colombian coffee prices.
Drought in Brazil. Brazilian coffee represents one-third of world production. It’s a huge market and has become the largest coffee producer in Latin America and the Caribbean. In 2023, Brazilian production was 55 million 60-kilo bags. This is expected to be surpassed in 2024 with a production of 59 million bags.
Time will tell if the forecasts come true, given that Brazil is facing its worst drought in more than 70 years. Temperatures are reaching 110 degrees Fahrenheit, higher than the average in other years, and are already affecting the 2025 crops. Some growers are reporting that some plants are dying before flowering. Moreover, they’ve only obtained 100 bags of grain out of the expected 120 this season.
Impact on Colombia. The ongoing drought not only impacts Brazil but also affects Colombian plantations. Alexander Taborda, the representative of the coffee committee in Antioquia, Colombia, has expressed concerns that the coffee cherries may not reach the desired weight and quality due to the extremely hot conditions in August and September.
Colombia is a major coffee market, and its exports increased by 36% during the first half of 2024 compared to the same period last year. However, this surge in exports doesn’t necessarily translate to higher profits for producers. If the quality or weight of the coffee is compromised, large buyers have the opportunity to negotiate prices, resulting in reduced profits for the producers.
Coffee and inflation. The situation in Brazil and Colombia has also significantly impacted the stock market. Recently, a pound of Colombian Arabica coffee reached a price of $2.70 on the New York Stock Exchange, marking a 43% increase in 2024. This price surge is expected to result in higher costs for consumers. Giuseppe Lavazza, president of the Lavazza group, expressed concern about the unprecedented price hike, emphasizing its effects on both international and local coffee prices.
In Colombia, the cost of 125 kilos of dry parchment coffee has risen from 1,360,000 pesos (about $330) in 2023 to 2,200,000 pesos (about $530) now. As the second semester of the harvest begins, which accounts for 60% of the 2025 annual production, producers anticipate needing prices between 1,800,000 pesos and 2,000,000 pesos (equivalent to $430 and $480) to remain profitable.
Price differences between large and small coffee producers. While consumers may expect higher coffee prices to benefit all producers, this isn’t the case for everyone. In Colombia, 90% of coffee growers are small-scale producers with plantations of less than 12 acres, yet they produce 60% of the country’s coffee. The remaining 10% are medium and large-scale producers, responsible for 40% of Colombian coffee.
This unequal distribution means that not all producers benefit equally from price increases in Arabica coffee. The timing of the price increase also plays a role, considering it coincides with the harvest season for large producers but not for many small producers. As a result, not all producers have seen the benefits of the price increase.
War and transportation. The ongoing war between Russia and Ukraine, along with increasing violence in the Middle East, has led to a rise in the prices of certain products. This isn’t due to direct imports from those countries, but rather the increased cost of transportation. The situation could seriously impact the economy, as seen in the case of Russia and Colombia.
Colombia exports many products to Russia besides coffee. During the conflict, the cost of chartering a plane has skyrocketed, leading to a tenfold increase in prices for some products. This has also contributed to the escalation of coffee prices.
La Niña and El Niño. Furthermore, it seems that there’s a “perfect” storm leading to an increase in the price of not only Brazilian and Colombian coffee but also coffee from other parts of the world, such as Vietnam’s Robusta.
El Niño and La Niña are two extreme climate phenomena. El Niño causes abnormal ocean surface warming, affecting temperatures and rainfall. On the other hand, La Niña causes cooling. Global warming is making these events more unpredictable, directly impacting plantations.
In Vietnam, drought is expected to cause a 10% drop in Robusta coffee production due to its timing during the cherry formation stage. This comes at a time when global demand for coffee, especially from countries like China, is steadily increasing.
Image | David Restrepo
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