Coffee Cost Creep: From Morning Must to Luxury Lust!

What was once an affordable treat is now slowly becoming an expensive luxury as coffee prices worldwide begin to climb, hitting new highs just this week. Let’s take a look at the whole story.

Impacting Your Daily Brew

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Your coffee habit is sadly getting more and more expensive to maintain as global coffee prices soar.

Global Coffee Market

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This week saw coffee prices hit all-new heights as supply worries put markets in a frenzy.

Weather Woes

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Extreme weather conditions, partly brought on by El Nino, have hindered coffee bean production, and there are worries that coffee crops will wither in size.

El Nino’s Influence

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As Africa battles its worst drought in years – which is affecting cocoa bean crops and production – coffee crops in southeast Asia are also feeling the burn.

Aging Trees in Coffee Farms

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There are also concerns about aging trees in Vietnam limiting supplies, which can lead to price increases due to high demand for coffee and low supply.

Coffee Bean Breakdown

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Let’s quickly break it down for people who aren’t coffee lovers. There are two main types of coffee beans used worldwide: Robusta and Arabica. Robusta is a bean used primarily for instant coffee and espressos, while arabica is used more for house blends and specialty coffees.

Robusta vs. Arabica

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Vietnam produces the bulk of the global supply of robusta beans, while Brazil is the world’s largest producer of the arabica bean.

Harvest Delays

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Unfortunately, this year’s harvest of these beans is way behind schedule, and there are fears that both crops have been damaged, which will affect the quality and crop size.

Prolonged Heat Wave in Vietnam

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Vietnam, which is typically well into its rainy season in April, is in the midst of a prolonged heat wave that’s damaging robusta crops.

Implications for Global Exports

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According to a report by the Vietnam Coffee Cocoa Association released last week, “Despite high export figures, Vietnam predicts a 20 percent drop in output in the current crop year, which will likely affect exports in the remaining months of this crop year.”

Panic Buying and Supply Chain Disruptions

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Robusta shortages have driven prices up as coffee roasters are panic buying whatever beans are left, making supply chain issues even worse.

Reaching Record Prices

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Futures prices for robusta beans hit the highest they’ve been since 2008, reaching $3,948 per ton, with contracts for July at $3,769 per ton.

Arabica Futures Prices

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Meanwhile, arabica’s futures have hit their highest levels since 2022, at $2.34 a pound. Arabica is grown in Brazil, and its prices have fluctuated in the last few months.

Extreme Weather in Brazil

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Extreme weather conditions across Brazil’s coffee-growing regions have driven prices up, and in some spots, rainfall has reached over three times the historical average.

Rainfall Concerns

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Farmers are worried that excessive rainfall will have damaged the crops, ruining the harvest.

Hedge Funds Betting on Rising Arabica Prices

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But prices have also been driven up by the shortage of robusta beans, which roasters often blend with arabica, and by hedge funds who have started betting on arabica prices rising – causing prices to rise even higher.

Growing Coffee Consumption

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Another factor hitting coffee prices is that coffee-producing countries are getting wealthier. Cities throughout Latin America are growing quickly, and people are becoming wealthier, which is leading to an influx of high-quality coffee shops.

Impact on Global Coffee Trade

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As these countries consume more of their own coffee, local markets are paying higher prices for coffee, and that’s leading to fewer producers exporting, which keeps prices high.

U.S. Coffee Import Trends

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The U.S. is the world’s largest coffee importer, which means that consumers will likely see even more price hikes in the future. Last year alone, the U.S. imported over $8 billion worth of coffee, with an estimated $1.35 billion worth coming from Brazil and almost $400 million worth from Vietnam.

Stock Market Reaction

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Coffee price increase will likely be passed on to the customers at coffee chains like Starbucks, which is currently watching its stock drop over 7% in the last month.

Climate Change Effects

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Supply issues like this are slowly becoming the new norm as global temperatures rise and extreme weather conditions become more common across the planet. As coffee prices continue to soar, the days of enjoying an affordable cup of joe may be numbered.

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For transparency, this content was partly developed with AI assistance and carefully curated by an experienced editor to be informative and ensure accuracy.

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