Jolt expected for coffee prices
Weather woes, political unrest in growing regions have put pressure on small US roasters
Coffee roasters have a problem. The cost of the beans that they import has soared this year, leaving roasters anguishing over whether their customers, from grocery stores to cafes to people looking for their daily latte, will tolerate higher prices.
Extreme weather has damaged crops in Brazil, the world’s largest coffee exporter. On top of pandemic-related shipping bottlenecks and political protests that stalled exports from Colombia, that has pushed the cost of beans up nearly 44% in 2021.
It is not yet a problem for Starbucks or Nestlé, coffee giants that buy their supplies far in advance and will not have to deal with the price gains for a year or more. But some smaller roasters have already had to raise prices, and others expect to — all the while worried about alienating consumers.
“These increases are making me nervous because one of the main tenets that we operate on is being able to make specialty coffee and make the pricing affordable,” said Quincy Henry, a co-owner of Campfire Coffee in Tacoma, Washington, which opened in March 2020 as the pandemic began. “It’s got me thinking about how we’re going to survive.”
Henry might have to raise prices or cut costs somewhere else, such as using cheaper supplies to roast coffee. If he does decide to charge more than the current $4.39 for his 12-ounce lattes, he said, he needs a price that “won’t scare people off ” as the economy recovers.
Henry remembers when Brazilian arabica beans were some of the least expensive he could buy, locking them in for $1.90 per pound. His latest order, in late July from the same importer, cost him $2.49 per pound.
Behind that increase is a run-up in the price of beans that will be delivered to roasters months from now. Traders call these “coffee futures,” and they serve as a baseline for buyers around the world. A pound of arabica beans in the futures market, usually $1.20-$1.40, rose above $2 at the end of July, the highest since 2014. On Wednesday, the price of coffee futures was $1.84 a pound. Prices climbed above $1.40 in late April as weeks of political protests rocked Colombia, the world’s third-largest coffee exporter. The country exported 345,000 60-kilogram bags of coffee in May, only one-third its usual monthly shipment.
Colombia’s exports have since rebounded, but those from other large producers, like Vietnam, have been slowed by shipping bottlenecks as the global economy struggles to reopen.
The big question is what will happen to the supply from Brazil. The country, which annually exports 34 million bags of coffee beans on average, has been hit with a series of climate shocks — a drought and plunging temperatures.
Temperatures last month fell below 27 degrees, about half of what is normal and the kind of cold that can damage or even kill coffee trees.
If the damage is bad enough, growers may have to “stump” their trees, or cut them down to the base, which means it will be three years before the next harvest, said Kevon Rhiney, assistant professor in Rutgers University’s department of geography, where he specializes in the coffee industry If they only need to prune branches, the harvest could be delayed a year.