Coffee drinkers could soon pay more for a dose of caffeine or be served a lower-quality brew, as global price hikes hit the local coffee industry.
- World coffee prices jumped 21.6%
- Climate change and global supply chain issues driving up costs
- Brazil’s specialty bean importers hit by 40 percent price hike
The “world price of coffee” has jumped 21.6% this year to $ 3.65 per kilo, according to IBISWorld.
The annual figures in the dataset are the average of the monthly prices of arabica and robusta green coffee beans, or raw.
“We haven’t seen this kind of price spike since 2014,” said Suzy Oo, senior industry analyst at IBISWorld.
What is behind the price increase? Weather events linked to climate change have affected major coffee growing regions and global supply chain issues are hurting importers.
Drought and severe frosts are estimated to have destroyed around 20 percent of Brazil’s coffee plants.
Brazil is the largest coffee producer in the world and accounts for around half of the world’s supply. It is Australia’s second largest source of coffee imports after Sweden.
Coffee shortage could happen
Importer Marcelo Brussi pays around 45% more for the specialty coffee beans it sources in Brazil. This does not include the increase in transport costs.
His business, Minas Hill Coffee, absorbs some of the costs, but he has to share some of the pain with the specialty roasters he supplies.
“This is a concern because some roasters might switch to commercial grade coffee beans instead,” he said.
Mr Brussi, who is also a member of the Brazilian Specialty Coffee Association, said Australia could experience coffee shortages by November.
“Producers’ production in Brazil has been reduced by around 25% and that will impact the supply of coffee around the world, and Australia is no different,” he said.
“The producers tell me it could last three years.”
Rising prices for consumers
Roasters are next in the supply chain. Brendon Bonacci pays between 50 cents and $ 1.50 more per kilogram for the coffee beans he obtains from importers. It supplies roasted beans to around twenty coffees.
“Having to pass the cost on to a suffering industry that has already been slaughtered by lockdown after lockdown is like a dagger in the heart,” he said.
Right now, Bonacci is just passing the cost on to his online retail customers, but that may change soon.
“We’re starting to have these tough conversations [with cafe owners] to let them know that the price hikes are coming, ”he said.
“This is the worst time for this to happen.”
“If you have a cafe that buys 50 kilograms of coffee per week, it could be $ 100 more per week for them, and right now, it could be the straw that breaks the camel’s back.”
Small businesses get ready
Ferguson Plarre bakery chain CEO Steven Plarre said rising coffee prices couldn’t have come at a worse time.
“Small businesses have had it very difficult for the past 18 months and the COVID challenges are not over yet,” he said.
The franchise signed a contract to supply coffee at prices 25% higher than the previous year, following the frost that destroyed 30% of crops in Brazil and Central America.
Droughts in North Africa also affected supply, while rising shipping costs helped push prices up.
“Getting your daily fix of coffee is something that has helped thousands of Ferguson Plarre customers get through the pandemic,” Plarre said in a statement.
“To think that prices will have to go up on top of everything they’ve been through is really hard to accept.”
Demand is also a factor
Hadi Ghaderi, an expert in logistics and supply chain management at Swinburne University, said increased demand for coffee will also keep prices high.
“Lockdowns and working from home have created a demand for premium coffee and coffee machines,” he said.
Australia’s imports of coffee products rose about 7 percent to $ 693 million last year, according to ABS trade data.
World exports of Arabica beans totaled 82.63 million bags against 78.89 million bags the previous year, according to the International Coffee Organization.
Robusta exports amounted to 46.97 million bags against 48.70 million bags in fiscal year 2019-2020.