Coffee is a beloved drink around the world giving many of us a daily fix. But, you may wonder what’s going on with wholesale coffee prices? They have been through the roof. Arabica coffee prices more than doubled in one year. That’s unheard of.

The previous all time high for Arabica dates back to 1977 at $3/lb. That record just fell. In this post, let’s understand what’s behind this astronomical rise and will high coffee prices persist into the distant future.

Coffee Cultivation Process Explained

To understand this price hike is to understand coffee and its cultivation process. Coffee plant origin traces back to Africa. There is a legend of coffee discovery in Ethiopia from the 9th century. The story goes like this.

There is a guy called Kaldi, who was a goat herder back then. One day Kaldi notices his goats acting strangely after eating berries off a tree. Brave Kaldi decides to give these berries a try and experiences an unheard of energy boost. And, that’s how humans discovered a potent drug sold over-the-counter worldwide.

Coffee beans are the seed pits of cherry-like fruit grown on shrubs called Coffea. So, coffee is really a fruit seed juice. The cherries have a resemblance to grapes. After flowering for about 3-4 weeks, it takes several months for coffee cherries to mature. As they mature, their color shifts from pink, red, purple and then eventually to black.

All in all, coffee farmers must wait about five to six months for harvest to be ready. But, it could be longer, up to 9 months. Waiting till coffee fruit turns black is a bad idea. Farmers usually focus on harvesting dark red fruit, as the chances of rot are minimal.

It takes three to five years for a coffee tree to mature and start producing fruit. It is not unheard for a coffee plant to yield crops for 30 or more years. But, after about 30 years, the coffee tree’s productivity tends to go down.

The majority of regions around the world yield one coffee harvest per year. But, if a particular area has no dry season, two harvests are possible. For instance, Colombia has two coffee harvests.

Coffee trees are demanding. To cultivate high-quality coffee, you need a tropical or subtropical climate. The temperature must be consistent at 64 to 70F. On top of it, the trees requires ample rainfall (60-80 inches per year), and rich, well-drained soil. Most often, coffee thrives in tropics around areas with soil of volcanic origin.

Global Coffee Production and Consumption

The largest producer of coffee in the world is Brazil accounting for 38% of global production. Vietnam is distant second with a 17% market share. The top five countries account for about 73% of coffee production. It is not surprising. We see that the listed below countries have the most ideal climate conditions for cultivating coffee.

Coffee Bean Varieties

Arabica and Robusta bean varieties dominate the world coffee market. Arabica originated in Ethiopia and accounts for roughly 60% of total production. Arabica is most popular since it is not bitter with a mild aromatic flavor and moderate content of caffeine.

Conversely, Robusta beans come second with a 20% market share or so. Robusta originated from sub-Saharan Africa and has a distinct bitter, woody flavor. Also, Robusta has way more caffeine than Arabica, sometimes 2x more. For this reason, Arabica is the preferred choice among consumers. At the same time, roasters use Robusta in instant coffee blends and espresso.

Unfortunately, the Arabica coffee plant is more demanding to grow than Robusta. Also, Arabica is less resistant to diseases. For this reason, Arabica coffee beans are more expensive than Robusta, sometimes by 40% to 50%.

The other popular coffee bean varieties are Excelsa and Liberica. Both Excelsa and Liberica have a naturally lower caffeine content compared to Arabica and Robusta. Excelsa is not bitter with a tart and fruity flavor. Liberica has an unusual woody and somewhat smoky flavor.

Based on common opinion, Liberica and Excelsa flavor profiles tend to be divisive. You either love them or hate them. Conversely, an average consumer enjoys Arabica with its mild flavor. So, it’s no wonder Arabica is so popular around the world.

Coffee Consumption

When it comes to total coffee consumption, the United States and Brazil top the list. The other notable countries are Japan, Philippines and China.

But, when it comes to per capita consumption, Scandinavian countries rule them all. Among them are Finland, Sweden and Norway.  

Over the last several years, coffee production did not keep up with demand. As many developing countries got wealthier, they also developed a taste for coffee. For this reason, the global stockpiles of coffee were on decline over the past 4-5 years.

Poor Weather in Brazil and Vietman

But, lately there was a shock to coffee production in Brazil and Vietnam. Massive droughts damaged coffee crops there and reduced harvests as a result. Temperatures have been above average with little rainfall. Coffee flower buds got zero chance to blossom and died off as a result.

What’s happening now is somewhat different compared to the last coffee crisis of the 1970s. Back then, there was a severe frost that decimated 70% of coffee trees in Brazil. Either way, we saw that few countries account for a large chunk of coffee production. So, anything bad happening there will inevitably lead to price spikes.

Higher Coffee Prices Ahead

Consumers are just at the beginning stages of feeling the pinch. It is a question of when, not if, for retail prices to go up. The United Nations went through an analysis on this. Their estimates suggest that 1% increase in wholesale coffee price leads to 0.20% – 0.24% increase in retail price.

There is a lag of about a year and a half though. The wholesale price for Arabica is almost 100% up. We can reasonably expect retail prices at coffee shops and supermarkets to go up by 20% to 25% in a year.

Make no mistake. The gap between wholesale and retail prices is currently very wide, in the realm of 50% to 70%. That’s a lot. For how long will this difference persist? Many analysts agree that retail price shocks are coming.

Coffee Price Negotiations Unravel

According to Bloomberg, in December retail coffee prices jumped by 6.6% in the US. But, a more severe coffee shortage is about to unfold. Many coffee roasters are at the beginning stages of passing through higher costs. In 2024, UK Pret A Manger café chain scrapped its free coffee subscription plan. A higher commodity cost is, of course, to blame.

Also, take J.M. Smucker. It is a producer of coffee brands like Folgers, Café Bustelo and Dunkin’. Smucker lately announced price hikes coming in as early as June of 2025. Nestle is countering coffee inflation by making its coffee packs smaller. That’s inevitable given that coffee beans represent around 70% of roasters’ costs.

Some retail supermarket chains are pushing back against higher prices from wholesalers. As a result, shortages unfolded. For instance, European consumers were greeted with empty coffee shelves. Among them are German supermarkets Aldi Nord and Edeka. For now, supermarket chains are trying to bargain hard for lower prices. But, there is very little chance for them to succeed.

As these negotiations wound up in the coming months, more price hikes are coming in retail. As we know, coffee demand is inelastic in the words of economists. What that means in layman terms is this: we are too hooked on coffee to give it up or substitute it for something else.

Are Higher Coffee Prices the New Normal?

Some people wonder if this is the new normal for coffee. Meaning, will the coffee prices remain high like it is happening with cocoa lately? In my previous post, I took a deep dive into chocolate production. There, I concluded that chocolate prices will be elevated for the foreseeable future.

The reasons are somewhat complex. Many cocoa farmers are old, poor and live in Africa. On top of it, there are some peculiar things happening on the cocoa market. Certain African governments act like monopolies. This prevents the invisible hand of the market to take care of the cocoa shortage problem.

But, what about coffee? The thing is that the coffee market is very different compared to cocoa.  It is a vibrant industry with many profitable large-scale farming operations. Countries like Brazil, Vietnam and Colombia can produce more if the weather improves. Current high prices provide all the incentive for that to happen. So, short-term, retail coffee prices may spike. But, long-term, it is unlikely that coffee will remain pricey.

In conclusion, stocking up on your favorite brands of coffee may make sense today. But, maybe, there is no need to hoard it. The market will take care of this problem in a year or two.