The coffee market has skyrocketed to an unprecedented 400c, following years of prolonged inversion and a historic price surge, reaching levels unseen in decades in 2024 and now hitting a record of 400c in 2025.
To fully grasp the current state of the coffee market and make sense of the high prices, we need to analyze and understand the factors that have shaped its trajectory over the last 5 years. In this article, we explore the key developments that have driven coffee prices from 100c back in 2020 to the 400c record in 2025.
The Calm Before the Storm (2020)
Our story starts in 2020, a year that saw relatively low prices driven by previous surpluses, but especially a particularly big Brazil crop. Brazil's large 2020 crop of over 70m bags was a major factor in sustaining low prices, with KC briefly trading below 100c/lb.
At that time, the market was in contango, with speculators and hedge funds predominantly positioned on the short side. Coffee, known for its tendencies toward extremes, had become highly one-sided with the bears. However, it was widely understood that a deficit was imminent, after severe drought during Brazil’s crop maturation phase in 2020 and weather problems in Colombia and Central America.
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The Starting Point (2021)
As a result, the market was anticipating a shift from a bear market to a bull market, which indeed materialized with a rally as the anticipated deficit approached. However, what the market did not foresee was the supply disruption caused by the frost season in June 2021.
Frost had not been a major concern in Brazil for years, especially with coffee plantations shifting northward, and so by 2021, no one expected significant frosts, but a severe event in July devastated crop prospects. Although frost affects the next crop, not the current one, it compounds the anticipated deficit in the market.
On top of that, supply chain disruptions during COVID caused transportation shortages, depleting destination inventories. The market soon recognized that a small deficit would turn into a larger one, resulting in the first inversion (since the 90s) around December 2021. From that point, the bull market continued until February 2022, when we reached multi-year highs of 250c.
Moment of Relief (2022)
But the high prices had done their part to cool off demand and to stimulate supply, and the market was fortunate enough to have a strong recovery in the Brazil crop. Despite transitioning to an off year, the Brazilian crop was expected to exceed 65 million bags in 2023, and to effectively replenish supply.
That being the case, the coffee market trended lower in anticipation of a supply rebound, with short specs being sucked back into the market at that point, but that ended in October 2023, with low stocks acting as the catalyst for the Oct 2023 rally.
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Turning Point – The 2023-2024 Bull Market
By October, certified stocks - and destination stocks in general - had fallen to five-year lows, as cheap futures lifted differentials and inventories were steadily consumed, a trend compounded by prior COVID-related logistical disruptions, persistent market inversion and setbacks in global production driven by adverse weather.
Stock decline accelerated into early 2024, and this rapid depletion reinforced market inversions of ~20c and supported prices, with stocks nearing 25-year lows. Despite this, early 2024 remained lackluster, with prices briefly dipping below 200c before recovering.
So, a year ago in 2024, the market was already stretched, in a fragile position to absorb new supply shocks. Just when an improvement in supply was needed to ease prices, we faced further strain with Vietnam exports collapsing on low supply, leading to a surge in Robusta prices.
Unlike the usual Arabica-led rallies, this time Robusta took the lead. Rapid crop selling left Vietnam - the world’s 2nd largest producer - with little remaining stock, and that became evident in both declining exports and the rallying differentials, which rapidly surged to records of >$800, in contrast to typical $150.
Meanwhile, Brazil was harvesting its 24/25 crop. Notably, rumors of small bean size (a result of plant stress from adverse weather) appeared to emerge around April and May, and so just when the market had acknowledged low stocks in Vietnam, it was also starting to come with terms with possible losses in Brazil’s crop yield.
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Reports suggested the beans were not meeting screen-size expectations, though at the time, these remained unconfirmed. It wasn’t until a few months later that the harvest and on-the-ground assessments substantiated those concerns.
The second 2024 rally reflected the market’s realization that Brazil’s coffee crop was smaller than anticipated and so – after years of deficits – a rescue from Brazil was unlikely. As the Brazilian harvest progressed from May through Oct, it became evident that beans were indeed smaller than usual, confirming earlier suspicions.
This led to sharp rallies in price differentials, particularly for large, high-quality beans (the scarce ones), which saw significant price surges.
The most recent rally, beginning in November 2024, was driven by extreme heat and drought. While Brazil’s dry season is naturally hot and arid, the severity of the conditions (especially the heat) and the underdevelopment of the beans (post-flowering) heightened concerns, fueling the last 2024 rally to >300c.
By the time Brazil’s main flowering period arrived, the weather had shifted with rains finally returning and bringing relief after a period of extreme heat and drought. Farmers and agronomists alike celebrated, sharing images of vibrant, abundant flowering. Some experienced producers even described it as one of the most beautiful flowerings they had witnessed in their careers.
That was when the market saw a moment of relief, pulling back by 20c in October. However, by Nov-Dec, signs of stress in the coffee plants became apparent. Farmers began reporting that the prolonged drought and, more critically, the intense heat waves of Sep-Oct had left lasting damage.
During my visit to Varginha in November, I saw firsthand the impact on the developing crop. The beans on the trees were notably undersized and lacked proper filling. As seen in this image taken during my trip, they were about half the size they should have been at that stage, according to agronomists on-site.
These visible signs of damage marked the beginning of a new rally that would eventually culminate in the current ~400c market. Ultimately, crop concerns, low stocks and years of weather shocks had set us up to a position where coffee can't afford any more big deficits, or if we have them, it's going to have a large impact on price.
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