Coffee prices hit 50-year record highs as Australian roasters brace for extra shot of pain

The world’s biggest coffee producer Nestle expects soaring coffee prices to accelerate in 2025 as Australian roasters brace themselves for an extra shot of pain.

Coffee prices have hit 50-year record highs, with Arabica futures for March delivery hitting $US3.26 a pound on Thursday.

Arabica is the high-end variety favoured for speciality brews and the main type of coffee consumed in Australia.

The soaring prices have primarily been driven by severe weather conditions in Brazil, where a long drought significantly impacted crop yields from top producers over the past few years.

Already, the average price for a cup of coffee in major Australian cities is $5.50 — up $1 year-on-year — and the recent spike could force coffee lovers to fork out even more for their flat white.

Nestle Oceania beverages general manager Martin Brown said Arabica prices were rising and forecast to increase further in 2025 as high temperatures and limited rainfall compromised the projected harvest in Brazil.

“We are continuing to work to find ways to minimise passing on these costs, but we will not compromise on the quality and taste of our products, or the investment we make in our farmers and coffee growing communities,” Mr Brown said.

“We are also investing to help secure a long-term coffee future, including accelerating our transition to regenerative agriculture to help build greater climate resilient coffee crops, improve yields and further support our farmers.”

Since 2022, Nestle has delivered two rounds of price increases across its brands, including Nespresso and Nescafe.

“In light of the current Arabica prices, we may need to look at various actions including changing pack size, promotions, or recommended retail prices,” Nestle said.

“Ultimately, the price at which retailers sell our products to consumers is at their discretion.”

Daniel Ash, owner of WA roaster and cafe Micrology Coffee Roasters, said he was now paying twice as much for his Arabica coffee — sourced from Central America, South America and East Africa — compared with the post-COVID period.

He’s had to deliver moderate price increases to his cafe customers.

“If prices continue to go up, are we going to raise prices? 100 per cent, otherwise we lose money. It’s that simple,” Mr Ash said.

“This uncertainty and volatility (in prices are) making a lot of coffee roasters anxious . . . we’re all bracing for a pretty tough time next year and beyond.”

Meanwhile, Australian coffee brand Vittoria said the hospitality sector was currently facing significant challenges, including high interest rates, rising input costs, energy price hikes and reduced foot traffic.

“The increase in the costs of coffee added to the overall cost pressures already being faced by the hospitality industry will place a huge stress on cafes and restaurants,” it said.

“Particularly when the latest forecasts are predicting that 1 in 10 Australian cafes and restaurants will close in 2025.”