Coffee prices are higher than ever. Here’s what it means for your cup

Brian Phillips gets texts from coffee farmers in Brazil almost every day. They send him photos of rain gauges showing some — or no — water. They report coffee trees flowering, then failing to produce fruit.

“My friend Sergio texted me and was like, ’Hey, when you’ve got time for a call, we have to talk about next year,’” said Phillips, who sources beans for Anthem Coffee Imports in Kansas City, Mo. “There’s definite concerns.”

That's because Brazil's coffee harvest is coming in short — by as much as a quarter, according to one of the top coffee traders.

Brazil is by far the biggest grower of the world's most popular coffee bean, called arabica. It goes into most ground or roasted coffee. Brazil's farmers this year faced one of the worst droughts on record.

“It eventually started to rain … but they had determined so much of the drought damage was irreversible,” said long-time importer John Cossette with Royal Coffee in California. “And that’s going to affect next year's crop pretty significantly.”

Brazil’s troubles followed an earlier wave of alarming coffee news.

Vietnam is the top grower of the second-most popular bean, called robusta, which is often used in instant coffee. Growers in Vietnam also faced a severe drought followed by heavier-than-usual rains. Scientists say climate change is shifting weather patterns in these coffee-growing regions.

Over the past year, the cost of arabica has jumped around 70 percent, while robusta has doubled in price. Last week, arabica prices on the futures market surpassed the previous record from 1977 of $3.35 per pound. It's not all because the industry needs the beans; financial speculators, too, have been cashing in on the chaos.

The situation has many U.S. roasters and smaller coffee shop owners assessing whether or when to raise their own prices without scaring away customers. For many cafes, the price of raw beans is part of a long list of expenses that fuel the total price for a cup of coffee, including worker wages, shipping costs and utilities.

Meanwhile, major supermarket brands — including Folgers, Maxwell House and Nescafé — have already raised prices.

The companies, on calls with investors, say shoppers seem undeterred. Folgers' parent company J.M. Smucker said it raised prices twice, in June and October, and in November reported coffee sales were still growing by 3 percent.

“People forget that coffee is a drug, a legal drug,” Phillips said, laughing. “Coffee consumption is not slowing down by any means.”

In fact, coffee shops are sprawling throughout countries where people didn’t used to be into gourmet coffee. China is a huge market. But so are the very countries that produce coffee — such as Brazil, Indonesia and Vietnam.

“They’re drinking a lot more coffee, and they’re drinking their own coffee that they’re growing,” Cossette said. “So there’s going to be less available coffee to export, and that’s going to make it more expensive as well.”

He and Phillips both take the long view, noting that by historic standards — when adjusted for inflation — raw coffee costs are nowhere near the record. Both of them think the futures prices will settle back down, at least somewhat. But big-picture, the market has changed.

“To me, the days of cheap coffee are gone forever,” Cossette says.

At least coffee grows in many different parts of the world, allowing Phillips and other importers to offer their clients alternatives to Brazilian beans: for example, beans from Honduras, Mexico or Peru. Historically, these options might have been pricier, but not after Brazil’s drought.

That's unlike cocoa, the majority of which grows in just two West African countries, Ghana and the Ivory Coast. Volatile weather there last year still has cocoa prices on a record-breaking surge to this day.

Copyright 2024, NPR

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