Coffee prices have been surging consistently amid production pullbacks in Brazil, Vietnam, and Indonesia

Coffee prices have surged nearly 60% over the past six months, with Arabica beans reaching their highest levels in half a century. This dramatic increase is squeezing margins at major coffee chains, while testing consumers' willingness to pay more for their daily brew.

Production shortfalls in key growing regions have been the primary catalyst for the rally. Brazil, which supplies about 40% of the world's coffee, has suffered severe weather setbacks including prolonged droughts and extreme heat. Meanwhile, Vietnam and Indonesia have seen their output drop by 20% and 16% respectively due to similar climate stresses. These supply shocks come as global coffee consumption continues its steady 2% annual growth, further tightening the market. Warehouse inventories have shrunk by about 20%, removing an important buffer against price volatility.

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While some near-term relief may emerge as high prices encourage production increases and economic pressures curb demand, the long-term outlook suggests sustained higher price levels. Climate change is making traditional growing regions less reliable, while new deforestation regulations may limit expansion of coffee farmland. Rising production costs, particularly for labor, add another layer of upward pressure. The coffee market appears to be entering a new era where prices structurally reflect these growing constraints on supply.