The coffee market is witnessing unprecedented price escalations, with futures contracts now nearing $4 per pound on exchanges in Chicago and New York, representing a doubling of prices compared to twelve months ago.

This significant surge is the result of a confluence of factors, including supply shortages from Brazil, rising production and transport costs, and geopolitical tensions.

Brazil, the world's leading coffee producer, has been particularly affected by climate challenges, including prolonged dry conditions and frost, which have negatively impacted coffee harvests.

Reports indicate that Brazilian producers have already sold approximately 85% of their coffee harvest and show reluctance to release more into the market, further constraining supply.

The situation has been exacerbated by trade tensions involving the United States and Colombia.

A recent confrontation between U.S. President Donald Trump and Colombian President Gustavo Petro over the deportation of migrants has rattled markets, even though proposed mutual tariffs have not yet been enacted.

The Colombian coffee industry represents about 8% of global coffee production, making it a critical player in market dynamics.

Following the U.S.-Colombia tensions, coffee futures rose by over 6% in just one week, priced at $3.5 per pound for March contracts.

In February, the price of Arabica coffee futures hit a record high of $4.3 per pound amid expectations of continued adverse weather impacting Brazilian coffee yields.

The International Coffee Organization (ICO) reported a global drop in coffee exports for January 2024, with 10.8 million 60-kilogram bags shipped, a 13.3% decline from the previous year.

This continued scarcity of coffee has led to historic price records.

Throughout 2024, coffee prices have increased by approximately 70%, reaching $2.99 per pound in December, the highest level since April 1977. The ICO's latest price index indicates an average of $3.54 per pound, levels not seen in nearly half a century, and an increase of 14% since January this year.

Projections for coffee production remain concerning, particularly for Brazil, which accounts for nearly 40% of the global coffee supply.

Analysts forecast that Brazil's coffee harvest will drop to 51.81 million bags for 2025/26, a decrease of 4.4%.

Meanwhile, Vietnam, the second-largest producer, has faced challenges with alternating droughts and heavy rains affecting robusta coffee supplies.

Market experts note that price increases are reflected throughout the coffee supply chain, affecting consumers, who still show strong demand for coffee, viewing it as either an essential commodity or a luxury good.

As prices continue to rise, the future of coffee supply remains uncertain, largely hinging on climatic conditions and subsequent harvests in key producing regions.