Coffee costs are up. What’s the deal?
You may have noticed that the price of coffee has been on the rise. If you haven't, you probably will over the next several months. This will happen in stages for us, as we finish out current green coffee contracts and start new ones.
Here is our attempt at explaining (as far as we understand) why coffee prices are at an all time high.
*When we use the term coffee below, we are referring to green (unroasted) coffee.
Quick answer:
“There is not enough coffee.” -Luis (a farmer we buy from in Brazil)
In a few more words:
Global coffee prices have surged to record levels, driven by supply challenges and adverse weather conditions in key producing regions like Brazil. This has led to significant market imbalances, pushing prices to unprecedented heights and impacting everyone from farmers to coffee drinkers all around the world.
A bit more info if you’re interested:
Prior to this recent surge in coffee prices, the cost of green coffee (from farms) has steadily been increasing. Some contributing factors to this have been a steady increase in global coffee consumption, coffee farmers’ cost of production has increased (labor, supplies, shipping, government fees), what we are willing to pay for specialty coffee has increased (this is good news!), bad weather resulting in lower harvests (droughts, floods, frosts).
Why Brazil matters so much:
Brazil produces about 39% of the world’s coffee. They have been dealing with a very severe drought since 2023, which has severely impacted their coffee harvest.
Coffee and the Stock Market (getting a bit more nerdy):
To complicate things further, coffee (commodity, not specialty) is traded on the stock market. No, WE don’t buy coffee on the stock market, but specialty coffee prices are typically priced at a differential based on the C Market price.
An over simplified example: If the C Market price is $2/pound, a farmer could sell it (regardless of quality) for that price. If they think their coffee is better than commodity coffee (which takes a lot of work and investment) they will try to sell it to a specialty roaster, like us, for a higher price. Let’s say $5/pound. Now if the C Market price goes up to $3/pound, they would need to sell it for $6/pound (the why behind that can be complicated and changes based on the specific situation).
A year ago, the C Market was around $1.91.
As of the time of this writing, it is $4.35.
(picture from tradingeconomics.com)
To put it simply: DEMAND UP + SUPPLY DOWN = PRICE INCREASE
Thanks for reading! Please respond in the comments if you have questions that you would like us to talk about in another post.
- Andrew Dittman