Coffee prices are soaring – could you give up your daily fix?

For the past 50 years, coffee production has kept up with rising global demand. Thanks to innovation, the price of coffee beans hasn’t changed much in nominal terms since the 1970s.

Adjusted for inflation, coffee has gotten much cheaper over time!

That trend is now at risk with adverse weather hitting the two largest producing regions (Brazil and Vietnam), affecting crop production forecasts for the 25/26 season.Compounding this supply risk is the fact that stockpiles are already at their lowest levels in decades.

What about the demand side?

Demand has never been higher globally. China has emerged as a new growth market for coffee consumption. Luckin Coffee alone opened 2,340 net new stores in China in the three months ending March 2024!

So what are you paying for in a cup of coffee?

There are 12 grams of coffee beans in a typical cup, which is only approximately $0.50 worth of coffee. The GST is often a larger component of the cost than the actual coffee beans! Wages, rent and other operating expenses also contribute more to the overall cost of your morning coffee than the beans.

So whilst it is good news a 20% increase in coffee beans is unlikely to flow through to a 20% increase in the cost of your flat white, this also means higher coffee bean prices are unlikely to cause people to stop drinking coffee. Since demand isn’t likely to drop, coffee bean prices are set to stay high - don’t expect much relief anytime soon.

Image source: The conversation and Pablo and Rusty's coffee roasters:
https://theconversation.com/think-5-50-is-too-much-for-a-flat-white-actually-its-too-cheap-and-our-world-famous-cafes-are-paying-the-price-226015