By Myra P. Saefong
Coffee futures are poised to notch their highest monthly percentage gain in over a decade
U.S. retail coffee prices in July were up 33% from a year earlier, according to the U.S. Bureau of Labor Statistics.
A more than 30% year-over-year rise in retail prices for coffee is staggering – and consumers are not likely to see relief anytime soon, even as a merger between two beverage giants looks to create an entity that can better manage rising costs.
Keurig Dr Pepper Inc. (KDP) announced this week an $18 billion all-cash deal to acquire Dutch-based JDE Peet’s NV (JDEPF). When the deal is completed, Keurig Dr Pepper (KPD) plans to split into two separate U.S.-listed companies: Beverage Co., which will focus on the North American refreshment-beverages market, and Global Coffee Co., a pure-play coffee company.
“The company’s new, expanded global scale should be a considerable advantage, providing the flexibility to better absorb high costs and the leverage to navigate trade challenges,” said Jake Hanley, managing director and senior portfolio specialist at Teucrium. “This creates a level of ability that can be difficult for smaller competitors to replicate, making the deal a clear move to build a more resilient company in a volatile market.”
KPD said the acquisition is expected to deliver about $400 million in annual cost savings, and analysts have said the new coffee company would rival that of Nestlé S.A. (NSRGY).
The new entity is expected to have a more “favorable position in supply-chain negotiations, enhancing its ability to manage costs and navigate volatility in commodity prices,” said Jena Santoro, global head of research and analytics at Everstream Analytics. “This market influence could potentially prevent price increases to consumers,” she said.
That’s not likely in the short term, however, given the “major issues impacting global coffee prices at the moment,” she said.
Global climate impacts, such as droughts, and the Trump administration’s tariffs on imported goods – particularly a 50% tariff on some goods from Brazil, which is a major supplier of coffee to the U.S. – are “reducing the availability and increasing the cost of raw materials,” said Santoro.
Read: Americans more worried about inflation and unemployment after new trade deals leave tariffs at highest level in decades
The world futures contract benchmark for arabica coffee (KC00) (KCZ25) has gained roughly 30% this month alone, on track for its biggest monthly gain since February 2014, according to a Dow Jones Market Data analysis of FactSet data. Year to date, futures prices have climbed more than 20%.
Prices settled at $3.853 per pound on the ICE Futures U.S. exchange Tuesday. They had marked their highest settlement on record back on Feb. 10 at $4.291.
At the retail level, the U.S. city average for ground roast coffee sold for $8.414 a pound in July. That’s up 33% from $6.307 in July 2024, according to data from the U.S. Bureau of Labor Statistics.
Coffee prices have climbed sharply over the past few years. Retail prices in July were up 84% from the same month in 2021, U.S. government data showed. More recently, Trump implemented 50% tariffs on some Brazilian imports earlier this month, contributing to the August rally in prices for coffee.
Three key reasons for the sharp rally in coffee-futures prices are the “weather, the U.S. president’s one-word vocabulary when it comes to trade policy, and continued strong demand,” said Darin Newsom, senior market analyst at Barchart.
Three key reasons for the sharp rally in coffee futures prices are the ‘weather, the U.S. president’s one-word vocabulary when it comes to trade policy, and continued strong demand.’Darin Newsom, Barchart
“The first is to be expected given coffee, like other [agricultural] production markets, is a weather derivative,” he told MarketWatch. Meanwhile, the U.S. tariff policy, particularly against Brazil, will raise domestic prices of coffee for the consumer, said Newsom, who’s also president at Darin Newsom Analysis, a commodity commentary and analysis provider.
It will be interesting to see if retail coffee is reaching a “tipping point where U.S. consumers back off from…drinks every day” to move to cheaper alternatives, he said. Those may include tea, or chicory – a flowering plant whose roots, when roasted, can serve as a substitute for coffee.
Looking ahead, Newsom said he expects coffee as being in a classic short-supply spike rally – “one that will come to a crashing end once weather improves or high prices shift demand to cheaper alternatives.”
There have already been increases and declines in a number of markets in the so-called “softs” sector, of which coffee is a part of, such as cocoa, sugar and orange juice, he said. He pointed out that the forward curves for these markets remain in backwardation for the most part, a situation where commodity prices for delivery in the future are lower than current prices.
“This tells us supply and demand remains bullish, meaning investment money continues to shift based on headlines at the time,” said Newsom.
The good news is that KDP’s acquisition of JDE Peet’s will put further pressure on small and mid-size roasters and café suppliers, while giving the pure-play coffee company that’s created from the merger “more leverage to stabilize pricing and supply chains,” said Ben Newsom, an analyst at Darin Newsom Analysis.
Long term, this merger is “more about stability and bargaining power rather than cheaper coffee for consumers,” he said. “It likely slows the rate of future price hikes rather than rolling prices back.”
-Myra P. Saefong
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08-27-25 1755ET
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