The Real Reasons Behind Rising Coffee Prices in 2025

In recent years, the global coffee industry has faced unprecedented challenges, driving coffee prices to new highs and creating significant uncertainty in the market. From the unpredictable effects of climate change to ongoing geopolitical conflicts and the introduction of strict environmental regulations like the European Union Deforestation Regulation (EUDR), multiple factors are converging to disrupt both the supply and demand of coffee worldwide. These shifts not only impact producers and exporters but also reshape the global coffee supply chain — with smallholder farmers often bearing the brunt. In this article, we’ll explore the key reasons behind the volatility in coffee prices and what they mean for the future of the industry.

How climate extremes, global conflicts, and new EU policies are reshaping the coffee market and driving prices to record highs

• • Climate change and erratic weather are significantly affecting the global coffee industry, leading to high and unstable coffee prices. Phenomena such as rising temperatures, prolonged droughts, and irregular rainfall have reduced coffee productivity and yield, resulting in supply failing to meet demand. Climate change not only increases coffee prices but also creates instability in supply and demand. Smallholder coffee producers are particularly affected due to limited resources to cope with harsh weather conditions, potentially exacerbating the imbalance in the global coffee supply chain.

• Wars and geopolitical issues greatly impact global coffee supply and prices. These factors affect supply chains, production costs, and export conditions in coffee-growing countries. The main aspects of these impacts include:

  • Supply chain disruptions: Wars and geopolitical tensions can disrupt global supply chains, including transportation and logistics.

  • Impact on input costs: Fertilizers are a key input in coffee production. Many fertilizer-producing countries like Russia and Belarus are affected by conflicts and economic sanctions. When fertilizer prices soar, coffee production costs also increase, putting upward pressure on coffee prices.

  • Currency fluctuations: Geopolitical tensions can cause major exchange rate fluctuations. The local currencies of coffee-exporting countries like Brazil and Vietnam are often affected by global volatility. When exchange rates shift, the export value of coffee may be adjusted, impacting international coffee prices.

  • Impact on demand and consumption markets: War and geopolitical instability often reduce purchasing power in coffee-importing countries due to increased living costs or currency devaluation. This can lead to decreased coffee demand in key markets, negatively affecting prices.

  • Trade policies and economic sanctions: Economic sanctions and export restrictions can directly impact coffee exports from affected countries, leading to coffee supply shortages on the global market.

  • Disruption of actual supply-demand dynamics: In many cases, speculation can cause coffee prices to deviate from real supply and demand. Prices may spike despite oversupply, or drop sharply even when supply is tight. This makes it difficult for producers and exporters to forecast and plan effectively.

According to reports from the International Coffee Organization (ICO) and market analysts, war and geopolitical instability often lead to increased coffee prices due to scarcity and rising costs. Additionally, US-China trade tensions and conflicts in the Middle East are also factors that can drive up coffee prices in the short term by affecting supply and costs.

• The European Union Deforestation Regulation (EUDR) is a new policy affecting global coffee prices as it directly or indirectly impacts the coffee industry.

For coffee, exporters must ensure that it is sourced from areas that have not contributed to deforestation since December 31, 2020. This regulation requires the coffee supply chain to be transparent and compliant with new monitoring requirements, significantly impacting major producing countries such as Vietnam, Brazil, Colombia, and Indonesia.

• • Impact on production costs: To comply with EUDR, coffee producers and exporters face higher compliance costs, including origin certification, environmental monitoring, and technological infrastructure upgrades to track production processes. These costs will drive up coffee prices, as producers and exporters are likely to pass on part of these expenses to buyers to maintain profit margins.

• • Impact on coffee supply: EUDR may restrict coffee supply to Europe if some producers are unable to meet the requirements. Producing countries, especially those with unsustainable farming practices or insufficient monitoring capacity, face the risk of being denied access to the European market. A reduction in supply from these producers could raise global coffee prices, especially if European demand remains strong. According to the International Coffee Organization, Europe is one of the largest coffee-consuming regions in the world. If supply to this region declines, other markets may struggle to make up for the shortfall, causing global prices to rise.

• Price volatility driven by supply-demand trends: Any supply constraint may lead to increased coffee prices. Additionally, if producers are forced to spend more to comply with EUDR, these costs will be added to the final product price, pushing up global market prices. Conversely, if many producing countries cannot meet EUDR requirements, they may shift exports to markets that do not enforce such regulations.