Coffee prices are on the rise–again. If you’ve been tracking the repeated hikes in the price of a cup of coffee, you won’t be surprised to hear there’s no relief in sight. What’s worse is that there is another one coming along– soon.
The coffee market has always been a roller coaster of highs and lows, much like the caffeine rush it provides. Recently, arabica coffee prices took a nosedive, hitting two-week lows. This might sound like good news—any price going down is good news–but the dynamics of the coffee bean market are very complex and volatile.
Just recently, Giuseppe Lavazza, CEO of the Italian coffee company Lavazza, said, “We have never seen such a spike in price as the trend right now.” Just last year he had predicted that prices would begin to fall this year. Now he admits he was wrong. “The coffee supply chain is dramatically under pressure,” he said. “Coffee prices are not going down … [they’re] going to stay very high.”
Both the high-end arabica beans favored by coffee chains like Starbucks Corp. and the more economical robusta variety have spiked in price, and whereas before, blending the different varieties could hold the price down somewhat, now that they have both surged, no amount of blending can soften the sticker shock.
Up and down the supply chain, sellers have been raising prices and abandoning discounts to protect their margins, and many warn of more increases ahead.
So, what’s causing this caffeinated chaos? Some of that run-up is connected to bad weather: droughts in Vietnam, the major provider of robusta beans, have greatly affected the supply. Dry weather in Brazil has shrunk the size of its arabica crop; damaged trees produce smaller beans, smaller beans means less coffee. The gap between futures prices for the two varieties is near the narrowest it has ever been, leaving companies scrounging for any poorer quality arabica beans instead of the usual cost-effective robusta variety to keep down costs.
“The strategy of trying to find cheaper, less expensive components for a blend…it’s a strategy that just simply doesn’t work anymore,” said Michael Kapos, vice president for sales and marketing at Downeast Coffee Roasters, a family-owned retailer and wholesaler based in Rhode Island. “There’s nothing left to do than for coffee shops to raise their prices.” His company rolled out a 5% increase earlier this year.
There are two other factors that have influenced the trend, the growing popularity of coffee on a global scale is placing demands on the supply, and a new awareness of fair trade practices means that wholesalers are paying more to the farmers who grow the beans, initiating a cycle of up-pricing.
Whether you buy your brew at your favorite coffee house or make it at home, be prepared to pay more to enjoy your favorite caffeinated indulgence. At a Blue Bottle Coffee cafe near New York’s Central Park, a 16-ounce sweet latte costs a whopping $8.25 — or $9.25 if you want almond milk.
The obvious get-around to the steep prices? Trade in your cappuccino or other fancy espresso-based drink for a plain drip coffee drink. At about 3 dollars a pop, it almost looks like a bargain.
