Coffee drinkers hoping for relief from rising prices will be in for disappointment as supply chain disruptions and rising labour costs are expected to make coffee even more expensive.
The price of arabica, the premium coffee bean favored by Starbucks, rose to $2.32 a pound last month, up 64% from June 2020, when it was just $1.41 a pound.
Robusta beans, a common ingredient in instant coffee, cost $1.86 a pound in June, up 187% from $0.65 a pound in the early days of the coronavirus pandemic.
Market observers say the inflationary trend is likely to continue due to severe droughts in Vietnam and Brazil, two major coffee exporters.
Vietnam, the world’s leading producer of Robusta beans, is expecting an estimated production of 24 million bags this season, the lowest in 13 years, according to global coffee trader Volcafe, due to drought that has caused “irreparable damage” to coffee flowers.
Bad weather in Southeast Asia is the main factor leading experts to predict a shortage of 4.6 million bags of robusta beans. According to Bloomberg News This marks the fourth consecutive year that farmers have failed to meet their harvest targets.
Brazil, another major coffee-producing country, also saw less rain than expected in the high-yielding state of Minas Gerais, the center of Arabica coffee production.
Coffee farmers in the South American country are reportedly stockpiling beans in anticipation of higher prices.
Supplies are expected to become even tighter as countries look to export beans before new climate regulations imposed by the European Union come into force.
The European Deforestation Regulation (EUDR) will ban companies from selling products such as coffee from 30 December 2024 if they cannot prove they are not linked to deforestation.
The new regulations are not just aimed at reducing the risks of illegal logging; their scope is far-reaching.
This applies to cocoa, coffee, soybeans, palm oil, wood, rubber and cattle.
To sell these products in Europe, large companies will have to provide evidence that they come from land that has not been deforested since 2020.
Small businesses have until July 2025 to do so.
“Buyers are looking for bigger volumes and earlier than usual because they need to get their coffee to Europe before the EUDR kicks in,” said Tomas Araujo, a trading associate at StoneX. He told Bloomberg News.
“That makes everything worse.”
American consumers are in trouble.
JM Smucker, the food and beverage giant behind popular brands such as Folgers, Dunkin’ Donuts and Café Bustelo, raised the prices of its coffee earlier this summer, while UK-based Pret a Manger eliminated its subscription service that allowed customers to have up to five cups of coffee a day.
Variety Coffee Roasters, a Manhattan-based coffee retailer, is raising the prices of its coffee by 5% this year, the company’s first price increase since 2019.
