The global coffee industry is navigating an extended period of high market prices. Over the last two years, green coffee costs have almost doubled, reaching an all-time high of US $4.41/lb in February 2025.

For many, this is a welcome and long overdue change. Coffee has historically been, and in many cases still is, undervalued. Many producers, particularly smallholders, receive consistently low prices that don’t cover the costs of production, preventing them from earning a sustainable, livable income.

As the C price has risen, a narrative has emerged that higher market prices result in more money in producers’ pockets, but the reality is far more complex.

I spoke with Vanusia Nogueira at the International Coffee Organisation, Paul Stewart at TechnoServe, and Steven Thomas at Traffic USA to learn more.

You may also like our article on why record prices don’t necessarily make producers “price makers”.

A new era for the coffee industry

Last year was historic for the coffee industry. Following reports of dwindling supplies in Brazil and Vietnam, the world’s two biggest producers, as well as uncertainty about the EU’s deforestation regulations, arabica prices surged to their highest levels since the 1970s, marking a 70% increase.

The last record high for arabica futures was US $3.39/lb, following the severe 1977 frost in Brazil. This record, adjusted for inflation in 2025, is around US $17/lb. Although the C price is currently far from this adjusted number, it underscores the significance of its sharp upward trajectory over the last two years.

All the signs point to a new era for coffee: one where high, volatile prices are a lasting reality. Roasters and importers now operate on thinner margins than ever, forcing them to raise retail prices, which inevitably reshapes consumer behaviour. Many foresee a surge in at-home consumption as people shift towards more cost-effective ways to drink coffee.

On the other side of the supply chain, sustained high coffee prices appear lucrative, but the reality tells a different story. Many producers and exporters are moving cautiously. Current market volatility means that, should they commit to future sales at fixed prices, they expose themselves to financial or sourcing risks down the line.

Why coffee prices will stay high in 2025

According to a recent UN FAO report, coffee prices are unlikely to decline significantly this year.

Coffee is a sensitive crop that requires specific temperatures, rainfall, and soil conditions to produce good yields and quality. Coupled with rising global demand, the worsening climate crisis has caused production and stockpiles to dwindle rapidly.

Brazil recorded its hottest year ever in 2024, which included severe droughts and wildfires that slashed yields. The country’s National Supply Company (CONAB) adjusted its 2024/25 harvest estimate downward by 6.8%, and an intense cold front in August further damaged arabica-producing areas. These supply constraints have fuelled a bullish market.

Beyond production woes, logistical bottlenecks and geopolitical disruptions have exacerbated cost pressures. Supply chain instability, freight price spikes, and ongoing post-pandemic distribution challenges have made it increasingly expensive to move coffee to market. 

Additionally, heightened global trade tensions – particularly tariff escalations from the Trump administration – have introduced further unpredictability, impacting exporters and importers alike.

The increased costs aren’t limited to logistics alone. Coffee processors and exporters are also facing price hikes in essential production inputs, including fertilisers, pesticides, and packaging materials. The ripple effect of these expenses ultimately influences retail coffee prices, making it harder for smallholder producers to compete with large-scale operations that benefit from economies of scale.

“The transmission of higher coffee prices to producers varies depending on the region and coffee variety. According to data, for example, we can observe a trend of price transmission to producers in Brazil and India,” says Vanusia Nogueira, the executive director of the International Coffee Organisation. “The challenges that remain are the increase in production costs (such as fertilisers, labour, transport), intermediaries, climate, and productivity risks that may limit the benefit of higher prices.”

The illusion of higher prices benefiting coffee producers

Although the rise in coffee futures suggests higher profits for producers, farmgate prices – the actual amount producers receive for their coffee – often tell a different story. The traditional coffee supply chain is complex, involving multiple intermediaries that capture a significant share of the value. Many producers remain financially strained despite record-breaking C prices.

“High tariffs, market concentration, and long supply chains can limit producers’ share of the prices paid, while transparent pricing, direct trade, and strong farmer organisations help ensure fairer distribution,” Vanusia says. “Exchange rate fluctuations and speculation also impact farmgate prices.”

One critical issue affecting farmgate prices is the lack of transparency in pricing mechanisms. Price increases are rarely reflected in producers’ payments, particularly in regions where cooperatives or local buyers dictate pricing. 

Moreover, price distribution can vary significantly across different markets. 

“Farmers in Guatemala, Honduras, and El Salvador, for instance, have seen farmgate prices rise roughly in line with ICE futures – between 70% and 85% – over the last year,” says Paul Stewart, the Global Coffee Director at TechnoServe, a non-profit that develops business solutions to help alleviate poverty. 

“However, in Ethiopia, farmgate prices have actually declined year-over-year, despite record-breaking global prices,” he adds. “Production costs have also risen significantly, particularly in Central America, where harvesting and processing costs have increased by up to 40%.”

Pre-financing also poses issues for producers. Similar to the position that many importers and roasters are finding themselves in, exporters are increasingly unable to access the funds they need to purchase large volumes of coffee at the new, higher prices.

“In countries like Nicaragua, farmers have only seen farmgate prices rise by 39% year-over-year due to a lack of liquidity in the market. Buyers there simply don’t have the capital to offer competitive prices,” Paul continues. “In contrast, in Honduras, grouping smallholder farmers together allowed them to sign direct sales agreements with exporters, leading to better prices and access to fairer financing.”

Why direct trade isn’t a straightforward solution

A cornerstone of specialty coffee since its inception, direct trade is often touted as the solution to paying producers higher prices for coffee. 

Unlike conventional sourcing models that involve numerous middlemen, direct trade, in theory, facilitates stronger financial transparency between roasters and producers, ensuring a larger share of revenue reaches the latter.

In practice, however, direct trade can quickly become a vague premise with no universally agreed-upon definition, reduced to a marketing buzzword with little intention behind it.

When done right, direct trade should be a strategic business approach for roasters to engage more closely with their suppliers, helping to manage cash flow and ensuring producers are paid a premium for quality coffee. 

That being said, there are still logistical hurdles to direct trade that don’t necessarily equate to more money shared across the supply chain.

“What surprises people who endeavour to trade directly is that it isn’t always cheaper and it’s almost always harder than buying single origin coffee that’s been greenwashed and stamped ‘A-OK’ by someone other than the producer,” says Steven Thomas, business owner at Traffic USA and Lucatelli Coffee, two companies which oversee logistics and supply for US roasters with monthly production capacities ranging from 120kg to 120,000kg. 

Direct trade often involves more effort and a higher price point compared to traditional models, which can deter potential buyers.

How market volatility undermines producer gains

Another overlooked reality is the market volatility that accompanies price hikes. Although there’s evidence to suggest producer income has improved over the past two to three years, market instability has made it difficult for farmers to fully benefit. 

“The income of producers has improved over the past 24 to 36 months, but that hardly makes up for the decades prior when they were being grossly underpaid,” Steven says. “What mitigates the benefits of increasing prices is the concurrent increase in market volatility. Producers want stability because it’s the thing they have the least, and it’s the thing they need the most.

“Market volatility, compounded by climate and geopolitical instability, makes rising prices less beneficial for growers.”

Volatility also affects long-term investment in sustainable farming practices. Many smallholder farmers struggle to plan for the future due to price fluctuations, which makes it difficult for them to invest in quality improvements, soil health, and climate resilience initiatives. 

Despite record-high prices, the financial benefits remain concentrated primarily at the roaster and retail levels. Traders, exporters, and coffee shops continue to capture the majority of profits, despite their margins decreasing in recent years.

Paul emphasises that improving transparency and efficiency in supply chains could increase the share of the price that farmers receive. 

“In well-developed coffee sectors like Brazil or Vietnam, farmers receive 90-95% of the export price. Elsewhere, that figure can be as low as 60%,” he says. “Making supply chains more transparent and efficient is key to ensuring fairer distribution.”

Elevated C prices alone can’t solve systemic issues in coffee production. Addressing these challenges requires a multi-pronged approach, including more equitable trade models, improved infrastructure, and financial stability mechanisms for farmers. 

Paul highlights the importance of policy interventions, citing Honduras’ VAT exemptions on agricultural inputs and Peru’s concessional loan programme as examples of initiatives that help smallholders invest in farm productivity.

“Clear national coffee plans that include, for example, living income and prosperity roadmaps, in addition to firm commitments from the government and private sector, help stakeholders work together towards a similar objective and secure the necessary funds to implement the right initiatives to help farming communities in their journey towards prosperity,” Vanusia says. “The specific policies will vary from country to country, but by building national coffee plans that have the public and private sector support, the chances of success increase.  

“Supporting these initiatives at the international level will help countries to design and implement programmes that will work for them, according to the reality of those respective countries,” she adds. “Our Task Force is an effective space for dialogue for both public and private sectors globally, while bringing that dialogue to action to the local level in coffee-producing countries.”

The narrative that higher prices mean higher profits for coffee producers is not universally true, and is far more complex than it appears. 

Without structural changes, even record-breaking prices will leave the majority of farmers, especially smallholders, struggling to sustain their livelihoods.

Enjoyed this? Then read our article on why producers are choosing to diversify their crops.

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