Why are coffee prices rising sharply in the U.S.?

[Coffee beans]
Henrik Sorensen

Coffee future prices (KC1:COM [https://seekingalpha.com/symbol/KC1:COM]) continue to surge in 2025, with both arabica and robusta reaching multi-year highs. The impact is being felt in the U.S. as retail coffee prices at grocery stores have also spiked.

The Bureau of Labor Statistics reported a 20.9% year-over-year increase in coffee prices in the U.S. during August, with both roasted coffee and instant coffee prices soaring during the month.

Major factors include a lingering drought in Brazil, poor crop conditions in Vietnam, persistent global supply deficits, strong demand, and currency fluctuations. Weather uncertainties for Brazil's 2025–26 harvest have also impacted coffee commodity trading.

Of course, the U.S. also faces extra pressure from new tariffs on Brazilian coffee, further raising import costs and shifting supply chains in a costly way. Brazil, the largest supplier to the U.S., has seen American buyers reducing new contract volumes and seeking alternatives, although sourcing options at notably lower prices are limited.

"Since the Trump tariffs took effect on Brazilian coffees, green coffee buyers have had to either eat the higher costs, pass them down towards consumers, and/or attempt to find comparable inventory from other producing countries such as Colombia, Peru, or Mexico," observed Daily Coffee News on the industry backdrop.

J.M. Smucker Company (NYSE:SJM [https://seekingalpha.com/symbol/SJM]) warned during its earnings conference call that efforts to mitigate higher green coffee costs through a combination of alternative sourcing strategies, supply chain optimization, and responsible pricing also include price increases to consumers in both May and August.

"Due to higher green coffee costs and the pass through nature of the coffee category, we took a price increase in May. Since then, price elasticity of demand trends have been favorable to our initial expectations, demonstrating the strength of our portfolio and the resilience of the at home coffee category," updated the company.

Looking ahead, KPMG Chief Economist Diane Swonk recently warned that coffee prices could easily exceed the all-time record as the full effects of the 50% tariffs levied on Brazil continue to work their way onto store shelves.

While coffee-related companies typically hedge many of their coffee costs, they could see an impact due to increased volatility and uncertainty in the market. In the restaurant sector, TD Cowen warned of a negative adjusted EBITDA impact for Starbucks Corporation (NASDAQ:SBUX [https://seekingalpha.com/symbol/SBUX]), Dutch Bros (BROS [https://seekingalpha.com/symbol/BROS]), and First Watch Restaurant Group (FWRG [https://seekingalpha.com/symbol/FWRG]) if tariffs are unmitigated.

Other companies that could face coffee pricing headwinds include Coffee Holding (JVA [https://seekingalpha.com/symbol/JVA]), Dunkin' Brands (DNKN), J.M. Smucker (NYSE:SJM [https://seekingalpha.com/symbol/SJM]), Starbucks (NASDAQ:SBUX [https://seekingalpha.com/symbol/SBUX]), McDonald's (NYSE:MCD [https://seekingalpha.com/symbol/MCD]), Costa Coffee (KO [https://seekingalpha.com/symbol/KO]), Tim Hortons (QSR [https://seekingalpha.com/symbol/QSR]), Luckin Coffee (OTCPK:LKNCY [https://seekingalpha.com/symbol/LKNCY]), Nestle (OTCPK:NSRGY [https://seekingalpha.com/symbol/NSRGY]), Keurig Dr Pepper (KDP [https://seekingalpha.com/symbol/KDP]), Kraft Heinz (KHC [https://seekingalpha.com/symbol/KHC]), and Krispy Kreme (DNUT [https://seekingalpha.com/symbol/DNUT]).

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