Coffee prices have been climbing steadily, creating challenges and opportunities for businesses across the supply chain. Recent months have seen the cost of coffee reach its highest levels since 1977, driven by a combination of economic, environmental, and geopolitical factors. In this article, we’ll explore the causes of this surge, its implications for businesses, and strategies to adapt in a volatile market.
Understanding Coffee Pricing
At the heart of coffee pricing lies the C Price, the global benchmark for a pound (imperial measurement) of Arabica coffee traded on the Intercontinental Exchange (ICE). This price fluctuates daily based on supply, demand, and market conditions such as weather, political risks, and currency movements. Commercial-grade coffees and lower end specialty coffees, commonly used in blends are sold at a premium to the C Price, while higher scoring specialty coffees typically command their own price due to their exceptional quality and scarcity.
For the past decade, low prices have benefited roasters and independent coffee shops, allowing specialty coffee to flourish. However, the current record-high C Price is translating into increased costs across all types of coffee, from commercial grades to specialty lots.
Why are Coffee Prices Rising?
Several interrelated factors are contributing to this dramatic price surge:
Climate Change
Coffee thrives in specific climates, and environmental disruptions can devastate production. Brazil, the world’s largest coffee producer, is particularly vulnerable. Recent frosts and prolonged droughts have stressed coffee trees, reducing yields and raising concerns about the quality of future crops. Such weather events not only impact Brazilian coffee but also create ripple effects throughout the global market.
Supply Chain Disruptions
The COVID-19 pandemic exposed vulnerabilities in global supply chains, including labour shortages and shipping delays. These challenges persist, compounded by geopolitical tensions and logistical issues like low water levels in the Panama Canal. Higher energy costs and interest rates are also increasing expenses for every stakeholder in the coffee supply chain, from farmers to importers to roasters.
Rising Demand for Specialty and Sustainable Coffee
Consumer preferences are shifting toward high-quality, specialty coffees and sustainably sourced options. As demand for these premium coffees grows, businesses face pressure to secure supply and manage rising costs.
Geopolitical and Economic Factors
Political instability in coffee-producing regions, coupled with global economic pressures, adds to market volatility. Conflicts in Europe and the Middle East disrupt trade flows, while currency fluctuations impact the cost of coffee exports.
Implications for Businesses
The rising cost of coffee has significant implications for businesses:
Increased Operating Costs: Importers, roasters, and retailers face higher costs across the supply chain, from sourcing to transportation.
Pricing Pressures: Businesses must decide whether to absorb these costs, pass them on to customers, or find alternative strategies to maintain margins.
Supply Chain Management: Ensuring reliable supply becomes more challenging as market volatility and logistical disruptions persist.
How Bean Smitten Is Helping Customers Adapt
At Bean Smitten, we recognise the challenges posed by rising coffee prices and are committed to supporting our business customers through this period of volatility. We'll be sharing the full version of this article with our business customers detailing the steps we are taking to help them adapt to higher coffee prices in 2025. If you'd like to know more or enquire how to open a trade account with Bean Smitten, please get in touch using this form.
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