Unpacking the Record High Cost of Coffee
Welcome to the Great Coffee Price Surge of 2025 - where your morning cup of joe might end up costing more than your lunch. Like us you’ve probably been side-eyeing the doomsaying news headlines saying you might find $12 flat whites by the end of the year. Statements like this are putting the coffee world on edge, and this time, it’s got nothing to do with caffeine. As of February 2025, Coffee C-price is sitting at well over $4.00 USD per pound ($4.33 USD per pound - Feb 14, 2025), this is over a 100% increase compared to a year ago, just think about that. This is a never-before-seen high, with effects that are rippling through every single nook and cranny of the supply chain.
But why is this happening? And more importantly, what does it mean for your daily ritual? Buckle up, because we’re about to dive into the bitter truth behind these scary news headlines.
Table of content
What Even is the C-Price, Anyway?
Alright, let’s break it down - because yes, we’re going to have to get a little financial. The C-Price is the global benchmark price for Arabica green beans (the variety that stars in your favourite specialty brews) on an international exchange. It is here that companies can trade "futures contracts", an agreement in basic terms, to buy the beans at a certain price at some time in the future. These contracts act like tradable vouchers: hold one until expiration, and you’re entitled to purchase the green beans, or sell it earlier to pass the obligation (and risk) to another buyer.
This system thrives on speculation and supply-demand dynamics, much like trading stocks or other commodities such as oil and gold. The price, moving up or down in concert with the twists and turns of the world's economy, it never stands still. The C-Price jumps at everything from drought in Brazil to hedge funds on Wall Street getting in on the action, their goal; profiting from the price swings. Buyers and sellers use these swings to hedge their bets, insulating themselves against price fluctuations that could hurt their competitiveness or bottom line.
If the C-Price goes through the roof? That means supply is tight, demand is increasing, or often both. When C-Price goes down, it could be because an oversupply is predicted. Due to the nature of growing coffee, roasters all use green beans that were actually grown the year before; the market price is heavily impacted by future expectations based on opinion and forecasts. For roasters and coffee companies around the world, these fluctuations are so much more than a number; they directly equate to how much it will cost them to buy green coffee beans.
The C-Price is also not the actual price the roaster will pay for their coffee, it's a base price that usually makes up about 80% of the actual cost to the roaster. If we’re talking about a specialty coffee, the price will always be higher as roasters seek to find quality and interest through high-grade beans, unique processing and characterful varieties, all of which come with an increased cost for farmers which, in turn, they passed on. However with the baseline price of green beans being so high the extra precision and care involved in producing specialty coffee isn’t as enticing to farmers as the price difference shrinks. It’s the farmers' passion, the roasters' quality standards and consumer trends that keep specialty coffee growing during a high tide market. An important thing to remember is that if a roaster is selling comparatively cheap coffee, then there is no way this can also be good quality coffee.
It’s safe to say, C-Price is a whole thing.
Coffee is a Global Game, Exchange Rates Hold the Cards
Coffee is traded world-wide and prices are always set in US dollars (USD), no matter where the origin is. For us Aussie roasters, this adds more complexity and volatility because when the dollar (AUD) takes a dip against the USD, our money doesn’t go as far. This is a game that all roasters are forced to play and it may have nothing at all to do with anything going on at the coffee’s origin. So it’s as if we’re riding two rollercoasters simultaneously - the C-Price and the financial exchange rates. Green bean buyers are as much Forex traders as they are commodities traders. It's one wild ride and right now, the AUD is faring none too good against the USD.
So, Why the Price Rise?
Well, I’d love to say this was simple but it’s anything but there are many factors that impact price, here are a few of the big ones:
1. Climate Chaos & Supply Squeeze
Weather can be unpredictable and the last few years have been a little chaotic in some of the most important coffee producing nations. Difficult growing conditions caused by weather such as droughts, floods and frost have been causing less than ideal harvests in Colombia, Vietnam but most significantly Brazil. I say most significantly because Brazil is by far the largest producer of green beans in the world at around 40% of the global coffee supply. Unfortunately, Brazil has suffered from challenging growing conditions for a few years now reducing their harvests. When Brazil’s crops suffer, the entire global market feels the shockwaves.
2. The Costs of Farming
Farmers are feeling the pinch as the cost of growing coffee beans continues to rise. One major cause of this is the cost of fertiliser which has been impacted by increased supply-chain costs from a certain pandemic we all try to forget about, compounded by trade disputes and even wars. Then there’s also the cost of labour that plays a part. While the world over we attempt to solidify fair wages for all workers we can’t ignore the fact that the increasing wage costs for producers makes things more difficult for them and that increase in cost gets passed on. There is also a lessening interest in taking on the physically demanding role of farm workers regardless of pay which has been well documented in Brazil.
Lastly, there’s the wildly fluctuating cost of fuel and transport which still hasn’t returned to pre-2020 prices. For coffee producers this is a significant cost mostly relating to transport from field to washing stations, an unavoidable step. All these factors add up to a tough time for coffee producers large and small which can be a heartbreaking reality for an industry that’s built on their hard work.
3. We Aren't Drinking Any Less Coffee...
The demand for this delicious habit is steadily growing. While western countries are solidly performing on the consumption stats this growth is mostly coming out of the newer markets such as China, India and Southeast Asia who are all adopting the beverage and creating their own cultures around coffee.
Specialty coffee itself is booming as well with the consumer trend towards flavour experiences with high-quality beans and a heavy emphasis on ethical, traceable sourcing. This is a fantastic thing as it means farmers are supported by roasters and consumers in doing things right, it also means higher demand for the really good stuff. As demand outpaces supply of these high end coffees the market has to respond with price increases.
4. Market Madness & Speculative Trading
As we mentioned early, coffee is a commodity and that means it attracts two types of market participants, those who need to buy or sell physical coffee, like roasters, importers, exporters and producers. Then there are those who don't ever intend to take delivery of the physical coffee their contract represents.
The second type of participant can inflate or deflate the price the same as stocks or the wild west of crypto-currencies. Regardless of your intention, buyers and sellers attempt to anticipate market increases or corrections or even day trade and try to profit on its volatility. If they anticipate supply challenges, they’ll assess how physical buyers and sellers might hedge their positions, speculating on where future prices could head.
On the other hand, if supply is forecasted to improve, the value of coffee and current futures contracts could fall below what other market participants are willing to pay because there is now an abundance. These actions can create wild swings especially when they coincide with other market actions but as you’ve probably heard with stories like Gamestop - sometimes it’s these purchases alone manipulating the market.
We all have a tendency toward FOMO (Fear Of Missing Out), the anxiety of missing opportunities others take advantage of. Traders often cluster their positions at similar price levels, driven by shared goals of avoiding losses or chasing profits, these clustered movements build momentum like a wave.
Different payers have different strategies, let's give you an overview:
Farmers: Hedging Against Price Drops (Short Hedge)
Imagine coffee prices surge, but they can’t sell immediately, they might not yet have buyers or need another 3 months before their coffee cherries are ready to harvest. A smart farmer would obviously want to take advantage of this so they sell a futures contract (think an IOU) at today’s high price. If the price drops by the time they sell their physical coffee to the roaster, they will still benefit from the futures trade they made. The farmer would then be required to buy back the futures contract they had sold previously to exit the trade, however this will be at the new, lower price. This is called a short hedge. The risk? If prices rise instead, the farmer loses money, forced to repurchase the contract at a higher price.
Roasters: Hedging Against Price Spikes (Long Hedge)
Since roasters require a steady intake of green beans to run their business it's a necessity for them to keep an eye on the C-Price and make purchase at opportune moments or risk losing their profit margin. The roaster acts as an insulator to their wholesale partners as they attempt to predict price rises and buy either physical coffee or futures contracts to lock in today’s price. If prices climb later before they have finalised the deal with the producer, they could sell the contract for a profit however, this is only done my the largest of companies as most roasters don't have the ability to tie up huge sums of money in futures contract gambles when they don't need the physical coffee.
The vast majority of time the roaster will complete the transaction and take possession of the physical green beans whether or not the market has risen or fallen. This is called a long hedge - attempting to buy at a low to buffer yourself and your wholesale partners from any price increases.
The risks? If the market drops, the roaster ends up paying more for green beans than the current market price. Alternatively, if the market keeps rising, as it is now, the price insulation they’ve secured will be great but won’t last forever. Sooner or later the roaster will need to replenish their inventory, and if prices have surged significantly, it could put them in hot water. Additionally, if a roaster has long-term agreements with wholesale partners made during a period of low market prices, rising costs can erode their profit margins. At today’s prices, some roasters might even be operating some of their wholesale agreements at a loss.
The roaster (along with the green bean supplier) helps to soften the impact of market spikes, reducing the effects for both wholesale partners and consumers. They act as a kind of cushioning, absorbing some of the volatility.
Speculators: Fuelling Volatility (and Liquidity)
Speculators, defined as those that don't want physical coffee, do very similar things in order to profit from price swings. This can drive the volatility of price, but they also create liquidity in the market. They are very necessary for physical buyers, like roasters and producers, as they are the ones on the other side of their positions. A market without speculators is called illiquid, meaning it can be very difficult for any players to buy or sell positions at fair prices.
The Bottom Line: Predicting the Future
Futures contracts let participants hedge risk, but misjudging the market leads to losses. May the odds forever be in your favour...
Who’s Feeling the Pinch?
Rising coffee prices aren’t just abstract numbers - the effects of price rise wave dumps all of us:
Farmers:
Smallholder farmers, the heart and soul of coffee production, often live with unpredictable incomes. While higher prices can mean better paydays, the constant volatility and mounting pressures - like rising production costs and climate risks - make it a tough balancing act.
Roasters:
For roasters, skyrocketing green bean costs are squeezing margins tighter than ever. Many implement strategies like hedging or forward contracts to lock in prices and manage risk but really there is only so much you can do, if prices remain high these actions are only delaying an inevitable price increase. This forward contracting is really the only safe choice in a market such as this, with the alternative being a serious gamble on the spot market which so far this year has only resulted in losses for the unlucky roaster as each day seems to bring a new, higher tidal line. It’s a high-stakes game of planning and adaptability but roasters are here to play it.
Cafes & Retailers:
You might not realise it but it’s these guys that are fighting the hardest to keep that $12 flat white from ever happening, and it might be to their own detriment. Historically, it’s been cafes that absorb a lot of these price fluctuations, being very reluctant to change prices for fear of backlash from their customers. This then puts roasters somewhat on railroads as to the prices they can charge as well and unfortunately a market like the one we are in now demands change all the way through. Many roasters are suggesting it’s time cafes muster the courage to tell consumers times have changed and unfortunately their morning brew costs more. It’s a tough thing to do when the cost of business in hospitality is already high but change is important for a sustainable business and industry at large.
Consumers:
Yes, you might start to see those rising prices reflected in your daily brew and yes, we know the cost of living is always increasing, our dollar seems to buy us less and less every year. But in order to keep everyone involved in healthy business a change seems inevitable. While I don’t think we’ll see price rises as high as the media would suggest, a few more dollars is likely and really would make all the difference.
The best thing you can do is to support cafes and roasters who are doing it right and supporting those smallholder farmers and offering ethical, traceable coffee, ideally with a direct connection to the producer. Roasters who hold their quality standards high will be forced to increase prices and this will in turn force cafes to increase prices, feel secure in this meaning that you will be drinking high quality coffee and not suffering through someone's choice to cut costs and corners.
Final Thoughts: What Does the Future Hold?
While no one wants to see another area of their lives affected by the increasing cost of living, this is just another trend in a long history of trends of a complex global market and we can all take comfort in the fact that trends don’t last forever even when they are particularly intense and enduring.
What always happens during these more difficult times is adaptation and innovation. Producers and roasters are putting efforts into practices and relationships that are focussed on ethics, transparency and sustainability with environmentally friendly practices and increasingly fairer trade policies. For consumers this results in a greater possibility that your daily coffee will hold more than simply caffeine but a story behind it as well.
Innovation in the form of more resilient coffee varieties is a constant, reducing farming costs by lessening the necessity of fertilisers and pest control methods while increasing yield and having the added benefit of creating new and novel flavour experiences.
While this is a very tough time for roasters especially the smaller companies and those who have chosen to risk the gamble of the spot market. It’ll be those businesses that invest in people and relationships that come out the other end of this stronger than ever. Investing in relationships with growers and ensuring a fair and sustainable price exchange ensures quality, consistency and security in supply, helping both producer and roaster to thrive.
So it’s important that we all ride this wave together and accept a fair and reasonable price adjustment during these times. No one, not the farmers, producers, importers, roasters or cafes are making change from a place of greed, attempting to take a larger slice of the pie for themselves. It’s all about maintaining a workable profit margin so all parties can continue to do their best and survive to continue to do so in the future.
Written By Rick Bennie - Blackboard Coffee Roasters
