Why Coffee and Chocolate Prices Are Heating Up in 2025

If you’re a fan of mocha lattes or indulgent chocolate treats, 2025 might be a challenging year for your wallet. Coffee and cocoa, the commodities behind these beloved staples, have dominated the markets as two of the fastest-rising commodities for the second consecutive year. The tight supply of both crops led to volatile trading in 2024, with cocoa prices almost tripling. As we look ahead, the market forces driving this turbulence show no signs of abating.

The Role of Climate Change in Supply Shocks

One of the primary factors behind the sharp price swings is climate change. Cocoa and coffee thrive in tropical climates, which are increasingly affected by extreme weather events. Prolonged droughts, erratic rainfall, and rising temperatures are all taking their toll on crop yields. According to Bloomberg, companies like Starbucks are investing heavily in research to develop more resilient coffee bean varieties, while major cocoa players like Hershey’s are stockpiling beans to mitigate supply risks.

Analysts from ING predict continued tight markets for both commodities in 2025. There is a glimmer of hope, as cocoa bean supplies are expected to return to surplus after a deficit in 2024. However, the impacts of climate change make forecasting increasingly complex, and the industry is bracing for further disruptions (ING Report).

Geopolitical Factors Adding Pressure

In addition to environmental challenges, geopolitical developments are adding to the uncertainty surrounding coffee and cocoa prices. Two key issues are particularly noteworthy:

• EU Anti-Deforestation Law: Starting in late 2025, the European Union’s new anti-deforestation legislation will require companies selling commodities in EU markets to prove their products were not sourced from recently deforested land. This landmark law is expected to increase compliance costs and tighten supply chains. The initial announcement of the law in 2024 caused price surges, and similar market reactions are likely as the implementation date approaches.
• US Tariff Policies: With President-elect Donald Trump’s promise of new tariffs, the commodities market is bracing for widespread impacts. Coffee and cocoa, largely imported into the US, are particularly vulnerable. While small-scale farming efforts exist in Hawaii, California, and Florida, they are far from sufficient to meet domestic demand, making these commodities reliant on global trade (The Wall Street Journal).

Challenges for Cocoa Farmers

Despite cocoa’s meteoric rise in the market, farmers in the top-producing countries of Côte d’Ivoire and Ghana are not reaping the benefits. These farmers are paid fixed rates for their crops by their governments, shielding them from market volatility but also preventing them from capitalising on price spikes. Adding to their woes are crop diseases and adverse weather conditions, which have significantly reduced yields. As The Wall Street Journal reports, some farmers are leaving the cocoa industry altogether, further straining global supply.

Outlook for 2025

For consumers and businesses alike, navigating the coffee and chocolate markets in 2025 will require adaptability. Climate change, geopolitical policies, and supply chain disruptions are converging to create a perfect storm. While some companies are investing in long-term solutions like crop research and sustainable practices, others are taking immediate action through strategic stockpiling and diversification.

As we move through the year, keep an eye on developments in the EU’s deforestation law and US tariff policies, as well as updates from major commodity traders and agricultural analysts. These factors will play a pivotal role in shaping the market dynamics for two of the world’s most cherished commodities.

Conclusion

For businesses operating in the coffee and chocolate sectors, 2025 offers both challenges and opportunities. Adapting to the realities of climate change, understanding new regulatory environments, and anticipating geopolitical shifts will be critical to staying competitive. Whether you’re a consumer concerned about rising costs or an investor seeking opportunities in the commodities market, staying informed will be key to navigating the months ahead.

Sources: Bloomberg, ING, Reuters, The Wall Street Journal, The Wall Street Journal