Navigating Coffee Market Volatility – Market Update
The C Market, or Coffee Market, represents the futures market for Arabica coffee and acts as a global benchmark for pricing. However, recent volatility in the C Market has driven up coffee prices, nearly doubling in the past year. This increase is driven by a complex mix of factors including supply-demand imbalances, severe weather events in Brazil, and rising production costs. Disruptions in the global supply chain, coupled with adverse weather conditions like frosts and droughts, have significantly reduced coffee yields. Additionally, global inflation, currency fluctuations, and political instability in coffee-producing regions have further strained the market, making it challenging for producers to maintain their operations.
Safras & Mercado reported Brazil’s 2024/25 coffee harvest was 87% completed as of July 23, faster than 74% last year at the same time and faster than the 5-year average of 77% This quick harvest we are seeing is a direct result of the drought, cherry development time on the tree is shortened and the impact will be scarce availability of screen 17+ coffees. The C price remains high and set to push into 250 USD/lb, on top of this we are seeing a high demand for containers and a lack of space available to ship containers globally. Shipping rates are up 233% compared to last year’s period, and the AUD/USD rate is in limbo. The Brazil Real is at a two-and-a-half-year low to the USD, raising the price of most inputs into coffee farming.
The risk of speculating that the market will go down would need to be backed by a massive turn of events unseen in the coffee industry. The test will be understanding what damage the drought has had on the trees for next seasons crop. But don’t bury your head in the sand and pretend that this isn’t happening. Start preparing for higher prices. Look at your COGS and services that impact your wholesale price. Increase your kg price – cafes will accept it so long as your service and quality do not diminish. Review all contracts, and review all nice-to-have services offered, If this is not done something will break.
Budget for higher COGS for as long as you can. Don’t speculate that the market will drop. Take a weighted average approach to buying to slowly absorb higher input costs Spot coffee for 24/25 will be expensive and the levers that roasters can pull to lower this cost are paying COD, paying on BL, and warehousing the entire contracted amount.
We are here to help you navigate these challenges. Our commitment is to provide you with not just coffee, but solutions that make sense for your business and contribute to the well-being of the coffee community.
For more detailed insights into the coffee market and to discuss your specific needs, please contact us at . Let’s work together to find the best solutions for your business.
