Perhaps some of you have already noticed: coffee prices are currently higher than they have been for 47 years. A pound of Arabica is trading at $3.26 on the stock exchange . Prices for Robusta have almost doubled in the past year. This can lead to many results. One result is certain for both roasters and consumers: coffee is getting more expensive. But the effects could also be greater; let's take a look at the whole thing.
Coffee price as high as ever – Why
Prices for green coffee are at their highest since 1977. There are many reasons for this, but many fears play a role: This is due to the new EUDR, the EU deforestation directive, which requires coffee roasters or producers to prove that the coffee they produce comes from a source that does not involve clearing rainforest. (The deadline has since been postponed, but the fear has still had an impact on the price.) This and unpleasant weather conditions have led to fears that there could be a supply disruption in top producing countries such as Brazil and Vietnam. The coffee world is in shock - even if such a development could have been seen coming. At the end of last year, the software manufacturer Algrano put forward a Big Short theory that spoke of a crisis in the coffee trade. The company even compared this crisis to the financial crisis of 2008.
Coffee price as high as ever - impact
The price of Arabica has risen by 70 percent this year. Good for investors, but not so good for roasters, retailers and consumers. This rapid price increase is not without impact on the global supply chain, or rather on the costs for each participant in the supply chain. Looking at the larger context, the price increase is largely due to weather problems. Brazil, the world's largest coffee producer, was faced with a prolonged drought and heatwave that damaged coffee trees and reduced production for the coming season. Vietnam, the leading Robusta producer, also experienced difficult environmental conditions. This shortage of coffee is having an expected impact on prices on the stock market: the same demand for fewer goods and prices are rising. And that applies to everyone, right down to the little coffee drinker around the corner.
Coffee price as high as ever – only moderately bad
This massive price increase is particularly noticeable for roasters and companies that buy coffee on the stock exchange. Since we buy all of our coffee directly from the producers and have always paid higher prices than on the stock exchange , the latest price increase does not affect us massively. And therefore neither does it affect our customers.
In direct trade, the higher prices not only ensure that we know that the coffee producers are paid fairly, but we also get high-quality green coffee.
It is also questionable whether coffee prices will remain at such high levels for a long time. Usually, after a massive increase, there is a correction phase in which prices move back down and settle somewhere between the old price and the new high price.
Coffee price higher than ever – challenges are there
Industry representatives such as the Specialty Coffee Association (SCA) have been warning for several years about the "price crisis" we are currently experiencing. Since 2019, a pricing initiative by the SCA has been trying to eliminate the discrepancy between producer costs and market prices. Even if coffee prices will (possibly) not stay this high in the long term, there will be high volatility in the coming months. Prices will therefore fluctuate greatly before settling at a new level for a longer period of time. Producers, roasters and consumers must learn to deal with this volatility.
Many may celebrate the current price increase as a victory for coffee producers. That they are now finally being fairly paid for coffee traded on the stock exchange. But the reality is more complex. In addition to the increased price per pound for green coffee, the costs for labor and fertilizers in the countries of origin have also increased. Together with rising inflation, the margins for coffee farmers remain just as tight as before.
Coffee price as high as ever – positions of power shift
However, the price increase also has a few positive aspects: the balance of power shifts somewhat in favor of the coffee farmers, as the product is no longer available in such abundance. This allows farmers to decide who they sell their coffee to and thus often choose the highest bidder.
However, it could also be that in the specialty coffee space, consumers are reluctant to continue paying sharply increased prices for premium coffee. And if consumers decide against it, the idea of price sustainability may be little more than an ideal.
Coffee prices higher than ever – is it even a crisis?
Many people are talking about a crisis in connection with the massive increase in the price of exchange-traded coffee. This term is often used by those who would like to maintain the status quo - that is, to buy coffee at the lowest possible price.
The aim of the SCA – and of many roasters in the market, including us – is to ensure that the market is priced sustainably. This is why so many roasters only buy direct, because most of the money doesn't get stuck with middlemen, but goes directly to the coffee farmer. But it's not just about price itself: real progress goes beyond higher payments – it requires understanding the reality of farmers, promoting equity and building sustainable practices. Change will come from direct engagement, shared responsibility and long-term action to empower the most vulnerable producers.
Coffee price is higher than ever – but it could still be tight
Roasters, especially small specialty brands, are under pressure as the cost of green coffee erodes already tight margins. Larger multinationals may be better able to weather the storm by leveraging economies of scale and diversified portfolios to maintain profitability. Coffee producers, on the other hand, can earn more right now, but they should be cautious about doing so. They should hedge those profits in case of further price increases or for periods of highly volatile coffee prices.
Finally, consumers also notice the increased costs through higher prices for coffee in supermarkets or cafes. This in turn can lead to consumers drinking less coffee outside the home and switching to cheaper coffees for at home. But the whole thing can also have a positive effect if consumers realize that the increased price of coffee is due to the fact that the actual costs of production are simply higher than often thought. This transparency could create a new dynamic that ensures that everyone in the coffee supply chain takes more responsibility for the entire industry. This creates more appreciation for the product.
Coffee prices higher than ever – what does the future hold?
Nevertheless, every coin has two sides: The current price increases can lead to coffee producers and buyers or roasters understanding each other better, listening to each other better and working more closely together to improve remuneration for producers and bring higher quality coffee to market. However, they can also lead to long-term partners becoming alienated and no longer working together. Will high prices create incentives for innovation and sustainability or will they increase inequalities within the supply chain? Both are possible. We hope for innovation and sustainability, because the coffee industry needs structural reform that ensures fair remuneration for producers and sustainable growing conditions.
Coffee price as high as ever – Conclusion
The prices for green coffee have risen massively. This means that a coffee or cappuccino in a café could soon cost a little more. However, the margins for producers, roasters or restaurants could simply decrease. The price increase has not affected us that much, as we have been focusing on sustainability and direct purchasing for many years, as it is important that the coffee farmers in particular receive fair compensation. This means that we have long been paying higher prices when purchasing than, for example, for exchange-traded coffee.
Overall, it would be better to see the current price increase not as a crisis, but as an opportunity. As an opportunity to understand the real costs of producing coffee and thus pay a fair price. Because the more money the coffee farmer receives, the higher the quality of the coffee we enjoy so much!
