Record Coffee Prices: Reasons for the Rise and Global Implications

Arabica coffee prices reached an all-time high, rising 2.3% after the threat of US tariffs on Colombia. Although the tariffs were temporary, they added further volatility to a market already facing shrinking global supplies.

The escalation was triggered by former US President Donald Trump’s announcement that his administration would impose sanctions on Colombia for refusing to accept two flights of deported migrants. The White House later announced a postponement of those measures after an agreement was reached to return the deportees.

Despite the rapid resolution of the conflict, even the short-term threat of tariffs has caused concern among traders. Colombia, the world’s third-largest coffee producer and second-largest producer of Arabica, ships about 40% of its coffee to the US, its largest market. That makes the country a critical player in supplying the global market.

Arabica coffee futures in New York rose 2.3% on Monday, part of a broader trend of more than 80% price increases from a year ago, according to Bloomberg. Poor harvests in key producing countries such as Brazil and Vietnam have been the main factors. The U.S. Department of Agriculture predicts that global coffee supplies will fall to their lowest level in 25 years in the 2024-2025 season.

Experts say the threat of tariffs could have long-term repercussions for the entire market. Marex Group analyst Steve Pollard said the tariffs could force Colombian producers to reroute premium coffee beans to Europe. This, in turn, will create additional demand for coffee from other regions and potentially increase retail coffee prices in the United States.

In addition to political risks, climate factors play an important role in the price increase. Weather instability in major producing countries such as Brazil is reducing yields and increasing market tensions. As a result, coffee prices will remain high, creating challenges for both producers and consumers around the world.