WHY ARE COFFEE PRICES RISING?
In recent years, the price of coffee around the world has surged.In the past few years, the coffee industry has struggled through a pandemic, droughts, bush fires and climate change. Cafe owners have had to see their way through this only to come out the other side now facing uncertainty with coffee prices rising. So why is this happening now?
With recent outbreaks of coffee leaf rust and droughts in several coffee-producing countries around the world, there has been an increase in the cost of coffee. In fact, the price per pound has nearly doubled in just five years.
However, because roasters blend different types of beans together, it's difficult to know where exactly your latte is coming from or what type of bean was used. What we do know is that the price of a cup at a local shop has gone up about 50 cents, and at fast food restaurants by about 10 cents. While this might not seem like much, those few cents add up quickly—especially if you're drinking more than one cup a day!
While prices have begun to return to more normal levels, farmers in countries that produce coffee are still worried.
While prices have begun to return to more normal levels, farmers in countries that produce coffee are still worried. Coffee growing is a risky business: in addition to the usual perils of farming, coffee prices are subject to the laws of supply and demand. If other crops produce unexpectedly high yields (or if the weather is unusually favorable for those crops), their supply increases relative to their demand. As a result, the price of those crops decreases. However, because crop yields may fluctuate from year-to-year based on things like global warming and unusual weather patterns, it's impossible for farmers to know what they'll make during any given harvest season.
Even though current coffee supplies are abundant enough that American consumers won't be seeing higher Starbucks prices anytime soon, farmers around the world will still feel the effects if prices continue to rise at their current rate.
One reason for the rise in price is weather patterns.
There are many factors that can affect the price of coffee at any given moment, but in general, coffee is an agricultural crop that is highly susceptible to weather. As with any agricultural product, when weather patterns fluctuate or change significantly (by a good amount) from year-to-year, it can affect coffee production in a variety of ways. For example, droughts can lead to poor yields (production) and frost may damage beans on the plants. When this happens with coffee crops, prices for consumers often rise due to low supply and high demand—it's a basic law of economics.
Higher prices can mean an increase in production and more competition, which brings down prices again.
Higher prices can mean an increase in production and more competition, which brings down prices again. For example, some farmers may switch to growing coffee instead of other crops like corn or soybeans. This will add supply to the market and could weaken the price increases. In addition, higher prices can often lead to a substitution effect (people drink less coffee), dampening demand for the commodity over time. Higher prices might also encourage research into new technologies that increase coffee production or help consumers consume it more efficiently.
Some argue that higher coffee prices are not necessarily bad for farmers because it allows them to earn higher wages, which in turn can stimulate growth in other parts of their local economies. In addition, high coffee prices could encourage many workers who have left the industry to return, creating even more jobs than before.
Cafeen - Blog by Coffeetonee