Why Are Coffee Prices Going Up And Up?
Every time we think that the market price for raw coffee beans has peaked, it soars even higher. Prices on the New York Mercantile Exchange crossed the $3 per pound mark Wednesday, before settling slightly lower. In the past 12 months, the cost of unroasted coffee beans is up over 125% — meaning it has more than doubled. Why are coffee prices so hot? Numerous factors could be feeding the market:
- Rising Demand: Consumers in fast-growing nations like China and Brazil are developing a taste for coffee, especially high-quality arabica coffee.
- Tight Supply: While demand is rising, supplies out of many of the world’s top coffee-producing countries are flat or declining. Heavy rain hurt production in Colombia, while Central America and Indonesia have failed to pick up the slack.
- Climate Change: Some analysts fear that coffee production in some of the world’s top coffee-producing countries may never return to peak levels, due to the extreme sensitivity of coffee beans to climate.
- Investors & Speculation: Across the board, the prices of commodities — corn, gold, oil, sugar, and the rest — have been on the rise. Some blame short-term speculation, while others expect weak currencies and inflation fears to prop up commodity prices well into the foreseeable future.
Every roaster and retailer has passed along at least one price increase as a result — many (including well-known retail brands like Folgers, Starbucks, and Green Mountain) have increased prices two or even three times in the last six months alone. As always, our office refreshments experts are here to work with you to discuss alternatives and different product mixes to help you save money and weather this storm. But under conditions like this, with prolonged growth in raw product costs, price increases are inevitable.
Read more from the Financial Times: Coffee breaches historic $3 level
