Coffee set to become more expensive as international prices hit record highs

Stephen Grootes gets comment from Paul Makube, senior agricultural economist at FNB.

Coffee prices are hitting record highs on international markets.

The price of popular Arabica reached its highest level since 1977 this week.

The rally was driven mainly by concerns over supply, as top producer Brazil battles drought.

Geopolitical factors, like what tariffs US president-elect Donald Trump could impose next year, add to the uncertainty.

Even international crude oil prices have not increased at this kind of level, remarks Paul Makube, senior agricultural economist at FNB.

"This is a weather problem that has ravaged parts of the world's largest producing areas, particularly in South and Central America."

Paul Makube, Senior Agricultural Economist - FNB

What about supplies from other coffee bean growers like Vietnam and Kenya? asks Stephen Grootes.

Makube points out that Vietnam, in fact the world's second largest supplier, has also been affected by drought.

"In 2023, 2024, production is estimated to have dropped by about 20% year-on- year."

"With this drop in your second biggest producer and challenges faced by your biggest producer, you're likely to see the situation where there's a scramble for the local stock available, hence prices have reached a record high."

Paul Makube, Senior Agricultural Economist - FNB

Added to this Makube says, is that as the coffee culture grows around the world, there hasn't been a corresponding increase in investment in new capacity to supply this expanding market.

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