Affected by shipping constraints, surging demand, and drought conditions, coffee prices on Wednesday rose to their highest level in a decade. On December 6 local time in the United States, Arabica futures surpassed 250 cents, closing at 250.20 cents per pound—nearly double the price at the beginning of 2021.

Although coffee futures market prices are not directly related to the price of coffee typically consumed in cafes, factors influencing prices—such as shipping shortages and climate change—affect everything from packaging materials to labor costs, as well as transportation and roasting, which ultimately impacts consumers.

Driven by depleted inventories, coffee futures prices have risen further. Ilya Byzov, a quantitative trader at coffee bean trading company Sucafina, stated that coffee inventories are declining and a shortage of beans is emerging.

The Brazilian Coffee Exporters Council (Coffee Exporters Council of Brazil), the world’s largest coffee producer and exporter, said traders are struggling to secure containers or shipping space, and those lucky enough to get orders face frequent delays in vessel loading by shipping companies.

Even though Brazilian coffee production has dropped significantly this year, its sales and exports have shown a downward trend due to container shortages and rising shipping costs. Cooxupe, a Brazilian coffee cooperative, predicted selling 7.2 million bags (60 kg/bag) this year, with 6.5 million bags exported overseas. But so far, only 5.8 million bags have been sold, with 4.8 million bags exported. To cope with the logistics crisis, the cooperative has started using “big bags” to ship coffee, aiming to transport via dry bulk ships with more available capacity, thereby improving export efficiency.

So far this year, container freight rates have continued to rise. According to the Drewry World Container Index, the cost of a 40-foot container was $9,050.77, still at a high level.

Due to the sharp rise in coffee prices, farmers are hoarding stock, limiting exports and increasing upward pressure on coffee futures prices. According to a USDA report in November, the risk of default among coffee farmers in three major Arabica-producing countries (Brazil, Colombia, and Ethiopia) has increased, as they attempt to resell at currently higher prices.

The emergence of La Niña may lead to a second consecutive year of drought in southern parts of South America. Rainfall in southern Brazil has been below normal levels, raising concerns.

At the end of November, the latest COVID-19 variant, Omicron, was reported, significantly increasing infection risks. Concerns grew that the variant could cause a resurgence of COVID-19 in Vietnam, prompting the government to impose restrictions, which pushed up Robusta futures prices. Jack Scoville of Chicago commodities brokerage Price Futures Group warned that a renewed COVID-19 wave could disrupt Robusta coffee bean exports.

In addition, as concerns over the Omicron variant eased, crude oil prices continued to rise. International ratings agency Moody 's on Monday downgraded its outlook for the global shipping industry from “positive” to “stable,” but noted that with limited new ship deliveries next year and supply and demand growth expected to remain broadly balanced—with demand growth potentially slightly outpacing capacity growth—shipping prices will likely remain high.

It seems that the pressure on coffee freedom next year might be quite significant.