Coffee farmers are facing a “deepening crisis” despite soaring prices as climate change and input costs threaten the sector’s resilience.
Leading independent coffee supplier Matthew Algie has warned that producers have been unable to reap the benefits of increased coffee prices as climate shocks, rising costs and financial pressures mount – leaving the sector’s future under threat.
The company said that soaring arabica prices – peaking at 425 cents per pound this year after more than doubling from last year – should “in theory boost farm income”. However, instead they were “failing to deliver real benefits for smallholder farmers”, who faced a “perfect storm” of challenges that prevented them from reinvesting or planning for the future.
Extreme price volatility, supply chain disruptions, speculative trading and droughts in major producers Brazil and Vietnam are all destabilising global coffee markets.
In addition, market speculation has driven up price volatility, as rapid movements in the coffee futures market attract short-term investors, which creates further uncertainty for traders and exporters attempting to manage long-term contracts.
Estelle MacGilp, head of coffee sourcing at Matthew Algie, said: “The coffee industry is facing a perfect storm of pressures, driving prices to near-unprecedented levels. But for many farmers, these prices don’t translate into sustainable livelihoods.
“Volatility is the real issue – prices can rise quickly, but they can also fall just as fast. That instability makes it difficult for producers to plan ahead or secure the credit they need to produce the next crop.”
Both arabica and robusta bean prices have skyrocketed over the past year, as Brazil and Vietnam – the world’s largest coffee producers – have experienced long dry periods that have shrunk their output.
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Meanwhile, geopolitical tensions, including the ongoing conflict in Ukraine and instability in the Middle East, have lengthened shipping routes, pushing up costs and further disrupting supply chains. Container displacement and poor port infrastructure have compounded the challenges.
But Amaro Cruz, of the Frontera San Ignacio Cooperative in Peru, argued small-scale producers – particularly those abiding by Fairtrade standards – were feeling the pinch the most.
“While high prices may temporarily increase income, cooperatives face rising financial costs and greater competition from local traders who offer high prices without requiring high quality,” he said.
“That can reduce supply to Fairtrade markets and make it harder to operate sustainably.
“Higher income can help us improve our farms, but the volatility means it’s hard to commit to those investments.”
However, the challenges faced by the coffee industry are having ripple effects across the board – most major coffee suppliers have also been forced to push those rising costs down the supply chain, with coffee products now retailing for far more than just last year.
This week’s Grocer’s Key Value Items tracker showed that the average price of Nescafé Original instant coffee (100g) had gone up in price by 30% at the start of May compared with the same period last year. The brand’s Gold Blend Instant Coffee (100g-200g) was also up in price by 7% versus last year.
Own-label is facing the same issues. Assosia data showed Sainsbury’s Colombian Origin Instant Coffee, Taste the Difference 100g, now retails at £3 (versus £2.15 in May last year), while Tesco Classic Instant Coffee 200g now costs £2.50 (previously £1.99)
To-go coffee drinks maker Emmi UK has also seen “a sharp rise in coffee prices in 2024”, said MD Julie Plant, as well as ”rising procurement costs in general, including sugar”.
“Given the challenging economic and geopolitical environment, market conditions remain highly volatile so we’re expecting the inflationary environment to continue.
“In general, Emmi Group has long-standing trusted partners along the value chain so we’re always working to balance any volatility through efficiency programmes and cost discipline.
“Only if unavoidable, do we pass on price increases responsibly to safeguard our high-quality products and consumers’ enjoyment.”
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