Is Coffee Really a Luxury? Here’s What the Experts Say – Executive Summary

In recent months, the global coffee market has been strongly influenced by a combination of factors that have transformed it into a true luxury commodity. The significant decline in inventories, which have reached historical lows, and recent adverse weather events are putting strong pressure on coffee prices.

The ICE Coffee Exchange recorded one of its lowest coffee inventory levels since 1999 at the end of 2023 and the beginning of 2024. The lack of inventory is one of the main reasons for the sharp rise in prices, with the price of a ton of coffee exceeding $5,000. This phenomenon is similar to what happened recently with cocoa, whose prices also rose significantly, as experts at XTB explain.

In addition to the low stocks, adverse weather events have had a negative impact on the quality of the beans. In Brazil, La Niña is causing severe droughts, affecting the 2024/25 Arabica coffee production. In parallel, Typhoon Yagi in Vietnam has destroyed large areas of coffee plantations, and the expected rains could contribute to the spread of diseases that would further jeopardize production.

Regulation also plays a crucial role. As the year draws to a close, new EU regulations banning products from deforested areas are prompting traders and producers to increase their coffee purchases in anticipation of future restrictions.

The situation is exacerbated by the partial blockage of the Suez Canal, which makes transporting coffee from Asia and some African countries to Europe longer and more expensive.

This dramatic increase in raw material costs is reflected in the price of espresso coffee. Currently, the price of Arabica has risen by about 40% this year, while the price of Robusta has increased by more than 90%. Although global supplies remain reasonably plentiful, the continued increase in demand and potential future shortages could have a significant impact on consumer prices.

Speculative funds hold a large number of long positions in coffee futures, and the recent increase in net positions suggests a possible upward trend in prices. If adverse weather scenarios materialize, prices may return to historical levels.