Bitter Brew: How Rising Coffee & Cocoa Prices Threaten Supply Chains—And What Suppliers Can Do About It

The Commodity Crisis: What’s Happening?

Coffee and cocoa prices are soaring, and it’s not good news for anyone. Coffee futures have hit 50-year highs, while cocoa prices have more than doubled in the past year, surpassing $12,000 per metric ton. Extreme weather, climate change, and crop diseases are wreaking havoc on supply, pushing traders, brands, and farmers into crisis mode. Traditional hedging strategies—like futures contracts—are failing to stabilize costs, leaving traders scrambling for a new playbook.

The root of the problem? Climate volatility is no longer an occasional shock; it’s the new normal. Droughts in Brazil, erratic rains in Vietnam, and rising temperatures across West Africa have slashed yields. Coffee leaf rust and cocoa swollen shoot virus are decimating crops. Even when farmers get higher prices for their beans, production costs—fertilizers, labor, and disease management—have skyrocketed, leaving many worse off than before.

How This Crisis Hurts Every Stakeholder

• Farmers: Smallholders, who produce 60% of the world’s coffee and most cocoa, are seeing lower yields and rising costs, forcing some to abandon their crops.

• Traders: The traditional hedging model is breaking down. Price volatility is triggering massive margin calls, squeezing liquidity, and making it harder to secure supply.

• Brands: Manufacturers are struggling to pass on rising costs to consumers, while supply shortages force them to make difficult sourcing decisions.

• Consumers: Coffee and chocolate prices are rising, and quality may decline as brands adjust blends or switch origins to cope with scarcity.

The bottom line? The old way of doing business—relying on market cycles and short-term fixes—won’t work anymore. Traders and brands must invest in long-term supply resilience.

The New Hedge: Investing in Farm-Level Resilience

To weather the storm, forward-thinking traders are moving beyond financial hedges and adopting “field hedges”—on-the-ground investments in climate resilience. Two of the most promising solutions are agroforestry and biochar.

Agroforestry: The Time-Tested Solution

Agroforestry integrates shade trees into coffee and cocoa farms, mimicking natural growing conditions. Benefits include:

• Temperature control: Shade trees buffer against extreme heat, reducing plant stress.

• Improved soil and water retention: Healthy soil retains more moisture, helping farms survive droughts.

• Higher yields and quality: Slower cherry ripening in shaded environments can enhance flavor and boost long-term output.

• Diversified income for farmers: Intercropping with fruit or timber trees provides additional revenue streams, reducing financial risk.

Several leading coffee and cocoa traders already invest in agroforestry, helping farmers transition to more resilient systems. But agroforestry alone isn’t enough. Soil health must be addressed, too.

Biochar: The Next Big Opportunity

Biochar is a charcoal-like soil amendment made by heating organic waste in low-oxygen conditions. It’s gaining traction as a game-changing solution for coffee and cocoa farms.

• Soil moisture retention: Biochar helps soil hold water, reducing drought stress.

• Nutrient efficiency: It locks in nutrients, reducing dependency on expensive synthetic fertilizers.

• Yield stability: Trials in Ghana and Brazil show that biochar can increase cocoa and coffee yields while reducing plant disease susceptibility.

• Carbon sequestration: Unlike agroforestry, which takes years to mature, biochar provides immediate carbon removal benefits—a key advantage for traders with decarbonization goals.

While biochar adoption is still in its early stages, companies investing in it now are positioning themselves ahead of the curve. Unlike traditional hedging, which only manages financial risk, biochar and agroforestry hedge against physical supply risk—ensuring stable, long-term crop production.