ICO Discusses Potential Impacts the Strait of Hormuz Crisis May Pose to Coffee – CoffeeTalk

The Strait of Hormuz crisis poses potential challenges for the global coffee sector, primarily through secondary cost increases rather than immediate bean shortages, as highlighted by the International Coffee Organization (ICO). The region is a crucial energy chokepoint, with approximately 20% of the world’s oil supply passing through, making any disruptions likely to raise oil and fuel prices that, in turn, impact coffee transportation, logistics, and fertilizer costs critically needed for production and export.

Although shipping traffic through the strait partially resumed following a US-Iran interim agreement, it has not fully normalised, especially amidst heightened tensions, such as recent warnings from US President Donald Trump about military action, driving oil prices higher. The Gulf states, particularly Saudi Arabia—which has seen coffee-consuming growth rates significantly outpace global averages—are less affected by instability in the Strait of Hormuz since their coffee is typically transported via road to Djibouti before reaching Saudi ports, avoiding risk near Hormuz.

However, the dynamics in the Red Sea and Bab el-Mandeb Strait remain pivotal as shipping disruptions might lead to increased freight rates and delayed deliveries. Factors contributing to the coffee sector’s vulnerability include rising shipping costs, trade uncertainties, and energy prices rather than a direct drop in consumer demand, given the Gulf countries’ growing market importance for coffee.

Smallholder farmers, representing about 80% of global coffee producers, find themselves particularly exposed to the effects of geopolitical instability. While they generally utilize fewer purchased inputs than large producers, their narrower financial margins and limited access to credit render them highly susceptible to rising logistics and transport expenses. In contrast, large commercial operations, benefiting from better financing, economies of scale, and advanced risk management, tend to cope more effectively with temporary spikes in costs.

Consumers might not encounter substantial product shortages but can expect slower promotions and slight price hikes as supply chain disruptions unfold, especially given that global coffee prices have remained elevated in recent years. Roasters have responded by minimizing SKU complexity, reducing package sizes, and streamlining sourcing.

To mitigate potential disruptions, coffee exporters and traders are encouraged to adopt strategies such as diversifying shipping routes, establishing strategic stock buffers, securing freight contracts with caps, and enhancing supply chain digitalization. Local sourcing or shifts towards alternative beverages are unlikely major trends stemming from geopolitical tensions, largely because coffee production is geographically constrained, making domestic substitutes unfeasible for many importing nations.

Long-term discussions among ICO members focus on bolstering resilience against global chokepoints. Initiatives include developing processing capacities at origin, creating multimodal transport corridors, and improving market data infrastructures for better anticipatory measures. The ICO is committed to fostering cooperation across production and consumption sectors to navigate challenges and support the livelihoods of over 125 million individuals reliant on coffee.

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