Silver Spring, Maryland-As if a cup of coffee is not expensive enough, a variety of factors have pushed up the cost for farmers to grow coffee beans, and it may begin to penetrate into local coffee shops before the end of the year.
After hovering around $1 per pound for many years, coffee futures — the price that a large number of buyers agreed to pay when coffee is delivered in the next few months — doubled in late July to the highest point since 2014. Prices have dropped, but they are still high at $1.90 per pound.
Coffee drinkers who paid $8 for a bag of coffee or $5 for a cup in the supermarket may be in desperate need of higher prices. However, the rise in coffee prices on the international futures markets does not always impact consumption.
Here are some factors that will determine whether Americans pay more for morning beans in the future.
What has happened?
Two frosts in July and a continued drought caused a shortage in Brazilian coffee production. This immediately pushed the wholesale price for Arabica coffee beans to over US$2 per pound. Carlos Mera from Rabobank analyses the coffee market and predicts that the 2022-23 harvest will be severely affected by the frost.
After the COVID-related supply chains chaos, container shortages and labor shortages, Brazil experienced a frost. Add to that the rising cost almost everything, and you’ll get a bitter cup of coffee for coffee drinkers.
Alexis Rubinstein is executive editor of Coffee & Cocoa, a commodity brokerage firm StoneX Group. “There’s never been a more perfect storm.” It is often a supply-demand situation.
“We have never dealt directly with supply and need issues based on logistics issues, labor issues or global pandemics.
Why will retail prices go up?
Meira stated that between 2 and 6 million bags of coffee were lost in Brazil. Although it’s difficult to estimate the extent of the loss, Meira believes that the number of affected beans is around 2 to 6 millions. This represents approximately 12% of global Arabica coffee production. Arabica coffee beans are used in most coffee worldwide. A lower supply is almost always associated with higher prices.
Grace Wood, an analyst in the coffee industry at IBISWorld (a market research company), stated that consumers won’t see a rise of coffee prices before the end of 2018. This is because there will be more per capita demand.
Wood stated, “This will only result in more demand, which would further disrupt operations and make things more difficult for operators who are already having supply problems.”