Coffee future prices sit near their highest levels in more than five decades due to continued weather disruptions, trade tariffs, and structural supply imbalances in major producing countries.
Key factors have tightened global coffee supply and pushed prices for arabica and robusta coffee futures to very close to their all-time highs.
Extreme weather in producing regions has been a major consideration. Brazil, which supplies roughly one-third of the world’s coffee, has faced severe drought and heat, cutting yields and bean sizes. Vietnam and Colombia have also struggled with erratic rainfall and dry spells.
On the tariff front, the U.S. enacted tariffs of 40% on Brazilian and 20% on Vietnamese coffee. Those two countries account for more than half of global output, sharply reducing export flows and raising U.S. import costs.
In terms of global supply, the coffee market is now entering its fourth straight year of coffee deficits. In addition, investors have turned to agricultural commodities as hedges against inflation, amplifying volatility across futures markets.
Companies potentially impacted by the level of coffee prices include Starbucks Corporation (NASDAQ:SBUX), Dutch Bros (BROS), First Watch Restaurant Group (FWRG), Coffee Holding (JVA), Dunkin’ Brands, J.M. Smucker (NYSE:SJM), Starbucks (NASDAQ:SBUX), McDonald’s (MCD), Costa Coffee (KO), Tim Hortons (QSR), Luckin Coffee (OTCPK:LKNCY), Nestle (OTCPK:NSRGY), Keurig Dr Pepper (KDP), Kraft Heinz (KHC), and Krispy Kreme (DNUT). Some of the impact of higher coffee input costs can be offset via pricing actions and hedging.