In this interview, Andrea Illy, chairman of Illy Caffè, discusses the recent surge in Arabica coffee prices, attributing the majority of the rally to speculative trading—about 70% of transactions are driven by investors unrelated to the coffee sector. He explains that adverse weather events, notably droughts in Vietnam and Brazil, have created a potential production deficit, while forecasts remain conflicted and a looming structural shortfall could span several years. Illy highlights the precarious situation of the coffee supply chain: 12.5 million micro‑growers across more than 40 countries, many living below the poverty line, produce 70% of the world’s coffee, raising questions about ethical and remunerative pricing. The interview touches on the possible consumer impact, with analysts warning of a 25% price increase in the next few months, but Illy notes that per‑serving costs remain low and that demand elasticity could moderate the effect. Historical price cycles are referenced, showing sharp drops after peaks. Illy praises the recent G7 public‑private partnership initiative, urging investment in regenerative and resilient agricultural practices to counter climate risks, noting that over 50% of suitable coffee‑growing land may disappear by 2050. He dismisses immediate tariff threats to U.S. green coffee imports but acknowledges broader trade‑policy uncertainties. When asked about operational impacts, Illy says roasters may adjust stock levels but overall purchasing remains steady, and Illy’s priority stays on maintaining quality and long‑term grower relationships despite short‑term profit pressures. The conversation concludes with a reminder of coffee’s health benefits and a call for coordinated action among governments, private sector, and consumers to safeguard the coffee ecosystem.
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TranscriptAuto-generated · 8 min
The amount of price of Arabica beans is really pretty incredible. We look at the charts and this could also translate even more into how much we pay for our cup of coffee. Does the rally still have room to run?
All-time records only due to speculation. 70% of the trading is due to investors which have nothing to do with coffee and only buy it to make speculation. And in one month, the annual crop is being sold. Just to give you the figures.
And speculation for what? Because there's also a number of challenges, right? Yeah.
Due to meteorological adverse effects, drought in Vietnam first, in Brazil later last year, which might cause a slight deficit in production. Traders are fighting between each other about the forecasts because some say that the deficit will not be there. Some others say that it will be minimal. Some others say that there is a structural deficit accumulating one quarter of the annual production over 5 or 6 years. Very, very confused. And this is made more difficult In this case, by some, let's say, governmental situations like the deforestation law here in Europe, which has been postponed last minute. It was supposed to be enforced on January 1st this year. It has been postponed one year, but doesn't say that this is the solution to only postpone the threat of tariffs. And also some philanthropical agencies like USAID, which were very helpful in coffee, has been turned down. So the G7 initiatives comes 3 months ago with this declaration that supporting, promoting a public-private partnership for investing in coffee resilience, and sustainability,
but
it's fantastic. And this is what we need to do.
But when you look at the prices and we have some great, you know, people following this in the commodities, I mean, they tell me that my cup of coffee, you know, could go up by 25% in price in the next 3 to 4 months. Is this a possibility?
It is possible. But in the perception of people, consumers, coffee is expensive. It is not, because if you look at the per serving, the price of coffee is quite low in our, let's say, basket.
Yeah.
And we have to consider that with this low price, these 12.5 million micro-growers, because we have to consider the statistic, 30% of the coffee is produced by only 30,000 middle-large growers. The remaining 70% is produced by 12.5 million micro-growers in over 40 countries, half of them living under the poverty threshold. So how much are we going to pay the coffee? Is it a remunerative price? Is it an ethical price for the whole supply chain? So this is, this is something we shall consider in the equation. And we shall also be aware about the value of coffee for our life. It makes you live better and longer, makes you happier, active, and healthier.
Not everyone agrees, but as you know, as an Italian, it's difficult.
There are every year another scientific studies proving that it's about longevity and it's protective about many, many cancers and diabetes and cardiovascular diseases and so on.
I mean, certainly a lot of people enjoy drinking it when, when you see these high prices, does it change consumer behavior? Do people drink less? Do they drink differently? Does it—
there is a certain elasticity, which is the risk, because now you trigger these ballooning prices. Historically, every time there has been a price peak, there has been a dramatic drop within the next 5 years. Last time the peak was $3 17. 5 years later, $0.40 per pound.
Yeah.
And this is dramatic because it impacts on quality, it impacts on poverty, it impacts on everything. We don't want that to repeat history once again just for short-term speculation. So this is really the time for the world coffee community stakeholders to react to this G7 solicitation to team up and invest in the coffee plantation for regenerative agriculture, which is much more resilient against meteorological effects and also more sustained, healthier in terms of the product that you produce, and also renovating the plantations which are too old.
And Andrea, in the more immediate term, with these very high prices, we've heard that some roasters actually are delaying getting deliveries because they thought it'd be lower. Are you hearing anything like that? I mean, is it changing anything at Illy, for example?
So the supply chain is what it is. Coffee consumptions are every day. So you need to buy coffee whenever necessary. Of course, tactically, you can try to compress your stocks for a certain period of time, but you have to buy.
So it doesn't really change radically?
No.
The way— I mean, you know, the other overlay is possible tariffs on this, on these trade wars. Do you think coffee will be impacted?
At the moment, there are no evidences that coffee, imported green coffee in the United States, to be threatened. But, you know, some of the countries threatened by tariffs like Mexico, Colombia, etc., are large coffee-producing countries. But I wouldn't consider this as one of the main threats.
Can I ask you, for a company like Illy, what's the biggest challenge when Arabica beans are so costly
to maintain consistency? This is our priority— quality, maintaining the same relationship, loyal relationship, long-term relationship with coffee growers, at the sacrifice of the short-term profitability, which is a problem for all coffee companies. But then for the listed one, it reflects in the stock price. So it's just chaos.
And this is set to continue. How does this get fixed, actually, unless there is some
kind of investing in the coffee plantation for resilience and better agricultural practices? This is what we need to do, because we shall always remember that this trend of the meteorological impact on coffee production is consistent with the prediction that over 50% of the suitable land for coffee agriculture will be gone by 2050. So we must react. And tropical crops don't have the financial and even the institutional capacity to make the necessary investing— investment to create resilience. We have to make the investment, governments and private sector from mostly consuming countries, because we have a cheaper cost of money and we have a interest that these countries produce good coffee for our lives and also stay in good, let's say, socioeconomic conditions in their agricultural economies.
Andrea, thank you so much, as always, of course, for joining us. Andrea Illy, the chairman of Illy Caffè. I also need to make sure— I mean, this is not coffee. I'm Italian. I only drink espresso. So I don't want to get in trouble with anyone.
