Coffee bean prices will continue to rise in 2025

On February 5, Arabica coffee beans for March delivery on the Intercontinental Exchange (ICE) in New York, the United States, rose nearly 2.5%, reaching a new point of $4/pound. In the second month of 2025, this popular raw material for beverages has risen by 25% in total, becoming the hottest commodity. Wind data shows that in 2024 alone, the cumulative increase in US ICE coffee futures reached about 70%.

“There are many reasons for the increase in coffee bean prices, the most important of which is the impact of bad weather in the main producing areas.” Hong Tao, vice president of the China Consumer Economics Society and director of the Institute of Business Economics at Beijing Technology and Business University, told the International Business Daily that Brazil, as the world’s largest producer of Arabica coffee beans, has had rainfall below the annual average since April 2024, affecting the final yield of coffee trees in the critical “flowering stage”, and long-term drought has led to a decline in both yield and quality. In addition to bad weather, market supply and demand imbalance is also a major factor. Global coffee consumption continues to grow, especially in Asia. China has the largest number of coffee chain stores in the world, and demand in Indonesia has doubled in ten years. At the same time, production expectations in major producing areas are being adjusted downward, and the situation of supply and demand has further pushed up prices. In addition, the increase in production costs has also kept coffee bean prices high. The costs of labor, seeds, fertilizers, etc. required for coffee cultivation are constantly rising, which will eventually be passed on to the price of coffee.

It is worth noting that the rise in coffee bean futures prices has gradually spread to the consumer end, and many foreign coffee manufacturers have begun to raise prices. However, experts believe that under the increasingly fierce “coffee involution” in China, the fluctuation of raw bean prices may have limited impact on the domestic terminal market. The rapid development of the domestic coffee industry has alleviated some of the pressure to a certain extent. For example, the coffee industry in Yunnan, China, is constantly improving its quality and scale, which helps to stabilize the price of the domestic coffee market.

Admittedly, the rise in coffee bean prices has a certain impact on the terminal price of coffee. In addition to the rise in the price of coffee drinks, it may also lead to changes in the market competition pattern. Large chain brands such as Luckin Coffee and Kudi are better able to cope with price increases due to their purchasing volume and long-term partnerships, while small boutique coffee shops face greater cost pressure. For coffee brands that rely on the advantage of “price wars”, cost pressure is particularly prominent, profit margins are compressed, and the space for “price wars” is reduced.

How to better digest the operating costs brought about by the rise in coffee beans? Zhu Danpeng, a Chinese food industry analyst, said in an interview with the International Business Daily reporter that although the rise in global coffee prices has put pressure on the market, it is also an opportunity for improvement and development for the Chinese coffee industry. With the transformation of coffee bean planting in Yunnan, Hainan and other places to boutique, the development potential of domestic coffee beans will be further highlighted.

In Zhu Danpeng’s view, the current coffee business in Yunnan, Hainan and other places has entered a standardized and large-scale development with the help of major coffee giants. In the future, the quality of domestic coffee beans will continue to improve, which will have positive help for coffee companies’ cost control and coffee price stabilization. Overall, the international coffee bean price may soar further, providing domestic coffee beans with greater development space, growth space and expansion space.

Brazil’s trade ministry said last June it had signed a deal with Luckin Coffee to supply about 4 million 60kg bags of coffee for about $2.5 billion between 2025 and 2029. Broker I&M Smith believes this represents growth potential in a relatively new coffee market, with Chinese consumption expected to continue to grow by around 16.5%.