Coffee traders and roasters are drastically cutting back on raw material purchases to the bare minimum—the industry is experiencing a sharp spike in prices, writes Reuters. Global coffee trade has come to a standstill.

At the National Coffee Association's annual conference, attendees expressed shock at the 70 percent rise in Arabica futures prices—a key benchmark for global trade.

The main cause of the crisis is a decline in production in the major coffee-producing regions, particularly in Brazil, which has led to a shortage of coffee beans.

"Usually by this time we have already sold out, but now we have sold only 30% of the products. The sharp jump in prices undermined the cash flow of customers — they simply cannot afford to buy the necessary volume," — complains Renan Shuayri, CEO of ELCAFE C.A. (Ecuador).

In response to the crisis, producers are actively expanding coffee plantations in India, Uganda, Ethiopia, and Brazil. If Brazil manages to produce even one large harvest, this, combined with the new planted areas, could drive prices down.

What will the consequences be?

If coffee prices remain high, consumers will face higher prices for coffee in cafes and stores. Small businesses that depend on a steady supply of coffee may suffer losses or be forced to close. At the same time, large producers may use the crisis as an excuse to raise retail prices, even if the cost of raw materials eventually falls. And if the harvest in Brazil falls short of expectations, high prices could become the new norm for years to come.