Coffee prices surge

Coffee prices have surged dramatically this year, rising by over 30% and approaching record highs. This increase is now affecting consumers directly, with roasted coffee prices up 2.5% and instant coffee prices spiking by 7.1% according to the latest US CPI data.

Several factors are driving these price hikes. Key among them are climate issues in major coffee-producing countries like Vietnam and Brazil. Poor weather conditions, including Brazil’s shortest harvest year on record and related forest fires, have significantly reduced coffee supply. Brazil, Colombia, and Vietnam, major suppliers to the US and EU, have all been impacted

The spike in instant coffee prices can be partly attributed to its already lower price point, which makes it easier for companies to pass on increased costs to consumers without causing major sticker shock. Instant coffee primarily uses robusta beans, which are cheaper than the arabica beans typically used in higher-quality coffee chains. Drought conditions in Vietnam last year severely affected robusta production, driving prices up by 60% over the past year. Additionally, rising shipping and labor costs have further contributed to the inflationary pressures in the instant coffee market.

Below is a very good graphic from Visual Capitalist about how coffee prices are broken down. One of the most popular commodities, coffee is supported by a massive $200+ billion industry. You can enlarge the image by clicking on it. However it is the developing countries who lose out and in some instances grow things like ‘chat’ (narcotic) instead of coffee beans. This has been especially prevalent in Ethiopia.

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