It’s all over the news and people are asking this question so here’s our best attempt to gather the news and answer you.
Let’s start by letting the story tell itself – it’s been building all year. If you just read these headlines and you’ll start to get an understanding. The BBC article on smelly fruit is a particularly helpful one for further reading.
In short, there’s been a perfect storm of events working against the coffee industry, particularly coffee farmers, mainly the robusta shortage in Vietnam and the drought in Brazil.
The Vietnam robusta shortage is pushing up demand for low grade arabica, which in turn is moving the whole market upwards. Coupled with this, the worst drought in Brazil for more than seventy years has yielded a lower harvest and that’s worrying the market as Brazil is by far the biggest producer in the world.
The problems in Colombia were evident to us when we visited in September where we saw the effects of no rainfall in two months, and the worry this is to small scale farmers.
Ian’s reflections on climate change sat on the La Primavera farm in Colombia.
A coffee tree struggling in the drought
The mass shortage of seasonal coffee pickers has hiked the cost of labour sometimes five-fold, and as the Brazilian economy develops there’s a movement of younger people into the cities, leaving behind family farms and creating a shortage of labour. This may well have huge consequences and cause a long-term problem for coffee production in many countries.
Sadly it doesn’t stop there. Higher demand for good coffee by consumers in India, China and other emerging economies are spreading a stretched supply even thinner. Higher global shipping prices add to the overall price pressure too.
And all this before it even gets to the UK where gas prices, higher wages and taxation play their part in the price mix.
Whether it’s Arabica or Robusta, coffee prices are at historical highs.
Check out any of the stories we linked or any news outlet of your choice to understand more on this.
BUT, it is not all bad news. What are EA doing about it?
Our direct trade model means we are well-placed to manage this for our cusomers really well. We secure our coffee each harvest for the year ahead, so less susceptible to monthly volatility in both the coffee and currency markets. We buy in bulk, and we buy direct, ensuring the farmer is looked after, but avoiding the multiple additional margins along the supply chain. We also have great, long-term relationships which means we have good security of supply, getting first choice on premium, speciality crops and not being left short of what we will need for the year ahead.
At one point we were expecting to have to pass on a huge increase per kilo!! But thankfully the market has relented a little and with shipping dropping a little along with the strength of UK currency we can manage it much better.
Whilst green beans (unroasted raw coffee) form the core price there are many other component costs for us as roasters which means the impact can be negated somewhat and whilst very real, is not as bad as it could be.
Especially the way we trade – as explained in brief above, we can secure coffee for the next season in one go by buying direct and offer our customer some price certainty in these volatile times.
Nonetheless it does mean prices will be going up soon whether it’s our daily flat white at our local coffee shop or a bag of beans from your favourite roaster (us!).
Not great news but manageable and a reminder to us all of the very real effects of climate change in our everyday lives.
REFERENCES:
>BBC NEWS (Sept 2024): How the world’s smelliest fruit is making coffee more expensive
>Daily Mail (April 2024): Soaring cost of a cuppa is revealed
>Bloomberg (May 2024): Bad News for Coffee Addicts: Cheaper Beans Are Getting Pricier
>Reuters (July 2024): Robusta coffee prices hit record high due to supply shortage
>ABC News (Sep 2024): Climate woes contribute to slump in global coffee supply as surge in demand raises prices
>AP News (Sept 2024): Brazil drought punishes coffee farms and threatens to push prices even higher
>Euro News (Sept 2024): Coffee prices on the boil as natural disasters decimate crops
>The INDEPENDENT (Sept 2024): Why the price of your cup of coffee is set to rise
