A New Era for the Global Coffee Industry
Since the start of the year, commodity coffee prices have surged past the psychological barrier of $4 USD per pound, reaching a peak of $4.40 in February.1 To put this into perspective, the average monthly coffee price has nearly doubled compared to the same period last year.
This sharp price increase is causing widespread anxiety across the coffee value chain. Cafés and roasters are grappling with the prospect of higher retail prices, making the once-hypothetical $10 flat white a near reality2. But does this price surge benefit farmers? The answer is more complex than it seems.
The Reality Behind Rising Coffee Prices
A major driver of these soaring prices is climate change. Unpredictable weather, rising temperatures, and droughts in key coffee-growing regions like Brazil and Vietnam have led to poor harvests and reduced supply. While higher prices per bag may seem beneficial, many farmers are producing fewer bags, offsetting any financial gains. At the same time, rising costs for fertilizers and other inputs mean that their margins remain slim. The instability of global coffee prices not only disrupts farmers’ incomes but also takes a significant psychological toll3. For many smallholder farmers and their families, this volatility poses an existential threat to their livelihoods.
The Challenges Facing Coffee Farmers
The majority of the world’s coffee is grown by 12.5 million smallholder farmers, 95% of whom work on farms smaller than five hectares 4. These farmers often have limited bargaining power in the global coffee market and rely on cooperatives for support. However, in times of high prices, intermediaries offering immediate cash pose a significant threat to the cooperative model, which exists to safeguard farmers’ long-term interests.
Climate change further compounds these challenges. Coffee farms within the ‘bean belt’ are biodiversity hotspots, but by 2050, between 30% and 60% of current coffee-growing land is expected to become unsuitable for cultivation5. Farmers also face rising threats from pests, diseases such as coffee leaf rust, and extreme weather events, all of which jeopardise their livelihoods.
A Sustainable Path Forward
While higher prices are part of the solution, and one which Fairtrade has long advocated for, they must be accompanied by efforts to build resilience in farming communities.
One emerging approach is supporting farmers in transitioning to agroforestry, which offers a range of environmental and economic benefits. Agroforestry involves farming in harmony with nature, eliminating the use of harmful chemicals and increasing biodiversity. Ultimately, the most effective solutions will come from the farmers themselves as they understand their challenges better than anyone. This is why every Fairtrade coffee sale generates a Premium which goes into a communal fund for farmers to use, as they see fit. In 2023 alone, global Fairtrade coffee sales generated over $142 million in Premium for farming communities.
By prioritising fair compensation, long-term sustainability, and farmer-led solutions, we can work together toward a more stable and equitable coffee supply chain that benefits all.
By: Sam Platt, Commercial Partnerships and Climate Solutions Manager, Fairtrade ANZ