Why Is Coffee Getting More and More Expensive?

On the rising coffee prices, causes, and forecasts

In recent years, the prices of both Arabica and Robusta coffee have risen sharply, sometimes increasing by tens or even hundreds of percent, with Arabica prices recently hitting all-time highs.

Let’s dive into some details to understand what lies behind these headlines and get a better grasp of the coffee market and some related terms.

Important Terms

Pound (lb) – Unit of weight used to measure coffee prices on the exchange (1 lb ≈ 0.45 kg).
Metric Ton – Another common weight unit (1 ton = 1,000 kg).
Speculators – Financial investors who don’t deal directly with coffee but buy futures contracts to resell at a profit when prices rise.

What Is the Coffee Exchange and How Does It Work?

Background on Coffee Trading
Coffee is one of the most traded commodities worldwide, and its price is mainly determined on international commodity exchanges.

Coffee trading mostly happens via futures contracts – agreements to buy or sell a certain quantity of coffee at a predetermined price on a future date. These contracts protect buyers and sellers from sharp price swings but are also influenced by speculators.

Main Coffee Exchanges:

• Intercontinental Exchange (ICE) – Handles Arabica coffee, the most common and generally higher-quality coffee. (New York)
  
  

• London International Financial Futures Exchange (LIFFE) – Handles Robusta coffee, mainly used in instant coffee and stronger espresso blends. (London)
  
  

What Led to the Recent Rise in Coffee Prices?

2019-2020: Relative Stability, Then the COVID-19 Crisis
Until 2019, coffee prices were relatively low due to oversupply in Brazil and Colombia. When the COVID-19 pandemic hit in 2020, significant supply chain challenges emerged:

• Labor shortages on coffee farms affected harvesting ability.
  
  

• Disruptions in freight movement delayed shipments and increased shipping costs.
  
  

• Demand for coffee at home rose, while café closures had an uneven impact on the market.
  
  

2021-2022: Extreme Weather Conditions in Brazil

• July 2021 – Severe frost hit Brazil’s coffee plantations, the largest coffee producer globally, destroying large parts of the crop.
  
  

• 2022 – Additional droughts in South America further reduced supply.
  
  

As a result, coffee prices soared from $1.80 per pound to around $2.40 per pound within months.

2023-2024: Rising Demand Amid Supply Problems

• Coffee consumption grows rapidly in developing countries like China and India.
  
  

• Logistic crises lead to 3-5 times higher shipping costs due to container shortages and port strikes.
  
  

• Rising costs of fertilizers and fuel push agricultural expenses higher, continuing price hikes.
  
  

Some Data: How Much Have Coffee Prices Risen?

Meaning: Coffee prices increased by approximately 83% in just two years!

Impact of Price Increases

• Consumers pay more – coffee prices in cafés and supermarkets rise accordingly.
  
  

• Coffee companies respond – brands like Nestlé and Starbucks shrink package sizes or raise prices.
  
  

• Increased demand for substitutes – more consumers turn to alternatives like herbal coffee or tea.
  
  

Why Is Coffee Even More Expensive in Israel? Here’s Another Reason!

Besides local VAT increases, social security, and the rising cost of living, there’s another factor:

The Houthis

In recent years, especially since late 2023, the Houthis in Yemen (a rebel group backed by Iran) have been attacking ships in the Red Sea and Gulf of Aden. These attacks directly raise coffee prices in Israel for several key reasons:

1. Disruption of Red Sea Trade Routes and Increased Shipping Costs

What’s happening?
The Red Sea trade route is one of the world’s most important maritime passages, used by commercial ships bringing goods—including coffee—from Latin America, Africa, and Asia to Israel and Europe.

The Houthis attack commercial ships with missiles and drones, causing major shipping companies to reroute vessels around the Cape of Good Hope at the southern tip of Africa — a longer, more expensive route used before the Suez Canal opened.

This detour significantly raises shipping and logistics costs, pushing coffee prices higher.

Shipping cost impact:

• Container shipping costs from China to Israel jumped from $2,000 to over $6,000 within months.
  
  

• Coffee shipment costs from Brazil to Israel rose by about 30%-50%.
  
  

2. Longer Delivery Times Cause Market Shortages

How does it affect coffee?
Coffee prices are highly sensitive to supply availability. When ships must take longer routes, delivery times increase by 2 weeks to over a month.

Temporary coffee shortages create upward price pressure because demand remains steady or even grows.

Example: Israeli coffee importers reported delays of several weeks, forcing price hikes to cover increased costs.

3. Stronger US Dollar Raises Import Costs

How are the Houthis linked to the dollar?
Instability in the Red Sea region causes investors to seek “safe haven” assets like the US dollar.

When the dollar strengthens, import costs rise for Israeli importers who buy coffee priced in dollars but pay in shekels.

Effect in practice: Since late 2023, the shekel weakened by about 5%-7% against the dollar, further increasing import costs.

4. Dramatic Rise in Marine Insurance Costs

Why is insurance important?
Every ship carrying coffee to Israel needs marine insurance against risks like piracy, war, and missile attacks.

Due to the Houthi attacks, insurers have raised premiums on ships passing through the Red Sea by 300%-400%, forcing importers to pass these costs onto consumers.

So Why Do the Houthis in Yemen Cause Coffee Prices to Rise in Israel?

• ✅ Disrupted trade routes cause ships to take longer, costlier paths.
  
  

• ✅ Delays create temporary shortages, pushing prices up.
  
  

• ✅ Dollar strength due to instability raises import costs.
  
  

• ✅ Increased marine insurance premiums add to expenses.
  
  

Result: Coffee prices in Israel are expected to keep rising as long as the security situation in the Red Sea remains unstable.

What’s the Outlook? Will Prices Keep Going Up?

Possible scenarios for 2025-2026

Prices might drop if:

• Weather conditions improve, leading to better harvests.
  
  

• Shipping costs stabilize and supply chains fully recover.
  
  

• Speculators lose interest in coffee futures, easing price pressure.
  
  

Prices might continue to rise if:

• Extreme weather events persist (droughts, sudden frost).
  
  

• Demand grows faster than supply, especially in developing countries.
  
  

• Energy and fertilizer prices keep climbing.
  
  

What Does This Mean for Consumers?

• Coffee is a highly volatile commodity, affected by weather, economics, and speculation.
  
  

• Staying informed helps — buying coffee in bulk before price hikes can be a smart move.
  
  

• Cafés and brands will keep adjusting prices — some will reduce portion sizes or offer cheaper substitutes.
  
  

The rise in coffee prices is not just an agricultural issue but part of a complex economic system affecting every cup you drink.