A historic crisis, but a promising future for specialty coffee
An article to clarify the situation
Why the rise in coffee prices? What should we do about it? Will it affect the future of our profession?
The price of arabica has hit record highs in recent weeks, reaching levels unseen in over 45 years. These increases and volatility have structural causes, causes that have existed for months and progressed over a number years without the industry paying much attention. Without understanding the imminence of the major coffee crisis.
Their three main causes are climate change, rural flight and the explosion in global consumption.
Climate change: a major cause of volatility
The main cause of this price volatility is more rapid climate change. It has had an increasing impact on coffee production in recent years, particularly arabica.
We are seeing more tropical storms in Central America and excessive rainfall in some regions of Colombia, while Brazil is experiencing increasingly long and intense periods of drought. These disturbances are reducing yields and damaging plantations, to such an extent that growers cannot always cope.
The situation is a source of much uncertainty for producers, who have no visibility over their future volumes and associated incomes. They are being required to take drastic action, with long-term consequences, for example reducing arabica production. Very small producers are abandoning their land, migrating or moving to the city in hope of better life. Others, more courageous or less fortunate, are remaining, and diversifying their production with more resilient or lucrative crops like coca (source: FranceInfo).
Most big farmers are taking a more pragmatic approach. They are planting Robusta on a large scale in place of arabica because it is genetically more resistant and promises better yields. According to StoneX, Brazil will be producing 10% less arabica (around 40 million bags) and 21% more Robusta by 2025/2026. It could even soon become the world’s leading producer of Robusta, ahead of Vietnam.
Rural flight: a structural phenomenon
Rural flight has had a particularly strong impact on coffee-producing countries over the past 30 years, for economic, social and, more recently, environmental reasons. It began with the end of the International Coffee Agreements in 1989, which once guaranteed a stable price for producers by regulating the volumes of coffee produced and exported. With the end of this agreement, prices collapsed and became volatile.
The situation has driven many small farmers into poverty, forcing them to abandon coffee growing, or even their land. Cities, meanwhile, are holding ever more appeal, offering more services (health, education, etc.) and better-paid employment opportunities. “Northern” countries (United States, Canada, Europe) are also drawing some of this workforce to offset their own shortages in the industrial and agricultural sectors.
This depopulation of the countryside has caused labour shortages and prevented some farms from being passed on to younger generations, leaving them to abandon.
Explosion in global consumption
The third and final cause is continuing growth in demand, correlating closely with the rise of the middle classes in many emerging countries. In China, for example, coffee consumption is growing by 15% a year (seven times faster than in the rest of the world), with a middle class estimated at over 300 million people, equivalent to the US population.
Historically, good coffees were exported, while lower quality coffees remained for local consumption. But this dynamic is changing. In recent years we have seen an upmarket shift in local consumption, in countries like Brazil, India and Colombia.
Aggravated by cyclical factors
These structural causes are amplified by various cyclical factors, including economic protectionism, bankruptcy and weakening of key coffee traders (Mercon, Volcafe, Cafés Bras, etc.), disruption of maritime traffic, wars, and currency devaluation. The markets are using these factors to speculate on a future shortage of coffee, leading to higher prices.
It is very likely that prices will continue to fluctuate sharply over the coming days, weeks and months. This constant tension, which has been felt for almost four years, is destabilising our businesses, disrupting our trade relations and generating a great deal of uncertainty. It is also encouraging some to take short-term decisions, undermining years of efforts to promote quality and traceability.
A changing market: new opportunities
Faced with this reality, we must remain lucid and optimistic, because the quality coffee sector does have a future!
To start with, many producers are refusing to admit defeat and are turning to more resilient farming models, such as regenerative agriculture and agroforestry. Felipe Croce, founder and director of FAF, has been employing these approaches for six years with producer partners. This year, during a period of drought, he observed significant differences in yields between plots cultivated using conventional methods and those applying regenerative farming techniques.
Secondly, the speciality coffee market offers lots of opportunities for growth. In France, for example, it accounts for barely 5% of the market. Lots of towns and cities are not yet equipped with small-scale roasting facilities. There is currently one coffee roastery for every 68,000 inhabitants, compared with one bakery for every 1,800! It is possible to attract new consumers through quality products, proximity and experience.
Finally, the exponential growth of independent coffee shops in urban settings bears witness to another underlying trend. In 2023, some 2,150 establishments were listed in France, 1,500 of which were independent (source: Food Service Vision). These establishments source their coffee from artisan roasters, and for many consumers they offer a first coffee experience. Consumers who then turn more readily to local roasters.
Conclusion: a team effort
Belco believes firmly that we must tackle these challenges with a clear head and play as a team. If we do, we can come out on top!
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