Have you noticed that you are paying more for your favorite beverage, coffee? We’ll you are correct. An average cup at your local coffee shop averages about $4.50. Five years ago it was around $3.85. That is about a 17% increase, compared to an overall inflation rate of 10%. What is causing this sharp increase?
There are a lot of issues factoring into this. The coffee industry runs on very thin margins and is a very competitive business. COVID lockdowns have disrupted the shipping of beans, which has adversely affected the supply of coffee worldwide. Another major disruptor of the coffee supply is the severe storms caused by climate change in areas where coffee beans are grown. More and more coffee crops are damaged because of this and roads used to transport coffee beans have been damaged due to these storms.
As we have previously reported, Arabica bean farming has also suffered, due to climate change, which affects the supply of coffee, causing prices to increase. Robusta plants, as the name implies, have fared better under climate change, but the quality of Robusta coffee is lower than Arabica and less desired in the coffee market.
Droughts around the world, especially in Brazil are causing a decrease in coffee cultivation. This is another factor affecting supply. Brazil alone has a 30% decrease in their crop output last year, because of drought.
All of these factors are driving up the price of coffee futures and have yet to fully impact the price at your grocery store and your local coffee shop. With this increase in cost, there is no decrease in demand for coffee. People want their coffee, regardless of price. We may switch to a less expensive brand or drink more coffee at home. But, our rate of consumption remains steady.
Coffee industry experts predict that all of these factors will cause the price of you cup of java to increase even more over the next 6 to 9 months.
You can watch a video on this topic here.