By John Baffes and Kaltrina Temaj
The World Bank’s beverage price index increased by 18 percent in December, following surges in coffee and cocoa prices amid renewed supply concerns. The index, which declined by 6 percent in the third quarter of 2024 (q/q), remains approximately 91 percent higher than its level a year ago. Following a 58 percent increase in 2024, the index is projected to decline by 9 percent in 2025 and an additional 3 percent in 2026 as coffee and cocoa production recover.
Coffee prices rebound. Arabica coffee prices surged by 13 percent in December (m/m), marking a year-over-year increase of over 60 percent. Robusta prices also rose by 5 percent (m/m), with prices more than doubling compared to the same period last year. Global coffee production is estimated to have reached 169.8 million bags for the 2023-24 season and is projected to rise modestly to 172.4 million bags in 2024-25, though still falling short 2020-21 levels. Coffee prices remain highly sensitive to global supply risks. While improved weather in East Asia has eased some pressure on Robusta prices, Brazil’s Arabica production faces significant shortfalls for both the current (2024-25) and, potentially, the next season. Arabica prices are forecast to decline by 8 percent in 2025 and stabilizing in 2026. Likewise, Robusta prices are anticipated to drop by a similar magnitude to Arabica in 2025, followed by a further 7 percent decrease in 2026.
Cocoa prices rebounded. Cocoa prices surged by 30 percent in December, averaging more than $10 per kilogram. This sharp increase was driven by concerns over poor weather conditions in West Africa, compounded by strong seasonal demand. Global cocoa production is estimated to have declined by 14 percent in the 2023-24 season, falling to 4.2 million metric tons (mmt) from 4.9 mmt in 2022-23. This decline is largely due to reduced output in Côte d’Ivoire and Ghana, which together produce nearly 60 percent of the world’s cocoa. Supply conditions are expected to improve in the 2024-25 season, particularly in Côte d’Ivoire, where favorable weather across key growing regions could boost production by up to 17 percent. After an anticipated doubling in 2024, prices are projected to ease by approximately 13 percent in 2025 and a further 2 percent in 2026 as additional supplies enter the market. However, the potential return of adverse weather in West Africa poses a significant upside risk to prices.
Tea prices stabilized. Average tea prices eased by 4 percent in December, led by lower tea prices at the Kolkata and Mombasa auctions (down 18 and 2 percent, respectively), while tea prices at the Colombo auction gained 4 percent (m/m). While supply concerns persist in some East African suppliers, particularly Uganda, global tea markets remain well-supplied overall. After an estimated 13 percent increase in 2024, tea prices are set to remain relatively flat in 2025, as a modest recovery in supplies from South Asia (especially India) and East Africa (notably Kenya) is counterbalanced by sluggish demand growth, particularly in the Middle East.
- This blog post is part of a special series based on the October 2024 Commodity Markets Outlook, a flagship report published by the World Bank. This series features concise summaries of commodity-specific sections extracted from the report. Explore the full report here.
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