Rising Coffee Prices

You may have noticed recently that prices for everyday items are starting to increase. Coffee is certainly not immune to all the global issues. With coffee there are a couple of major factors leading to the increased price. Covid is the main factor for increasing prices whether that's due to worker shortages or increased demands on import/export. Probably not a shock to anyone. Before we talk about why costs are going up, it is important to mention that coffee has been undervalued for a long, long time. Coffee has been consistently traded at below cost of production causing many farmers to move to more profitable crops or to continue living . Unfortunately not all of the increase in cost will result in profits for the farmers. Coffee sold at cafes has a similar problem. The local cafe is a cultural pillar in Australian society and it's great to not have to travel far for a latte. It also means that cafes have a lot of competition which has kept coffee prices roughly the same for as long as I’ve been alive. I mention all this because prices will have to go up at the cafe level and retail level which will almost certainly come as a shock to some people.

Lower Production:

For an extremely long time, Brazil has been the largest producer of coffee in the world, producing around 50% of the world's coffee annually. In 2019 and 2020 Brazil’s crops were hit with massive frost causing the loss of thousands of coffee trees to die and millions of bags worth of production lost. Historically when Brazil has faced production issues, such as a black frost that occurred in 1975 coffee prices to increase by 100% globally.

Shipping and cargo costs:

Shipping costs have gone up… a lot… To say the least. The shipping of a single container from China to Australia has doubled in cost, which not only affects the cost of coffee coming from China but also take-away cups, ceramic cups and packaging. With all this in mind it is safe to assume that the price of coffee, speciality or otherwise, will increase over the next 12 months. The cost of a cup of coffee from a cafe which has remained competitively low since you could buy a cup of coffee could go up 30-50cents per cup. Retail coffee prices should also increase a few dollars a kilo. It is hard to say whether these price increases are permanent or temporary. As Brazil recovers, coffee supply will recover as well, and hopefully as things return back to “normal,” shipping costs will also decrease. However, as I mentioned earlier, coffee across the supply chain has been undervalued (monetarily undervalued, not emotionally) and this may be enough cause for people to keep prices a little higher. Hopefully, with the increased prices going to those who need it most.