Why the cost of coffee beans is climbing
Here’s a question: How many cups of coffee have you had today?
The National Coffee Association says more Americans drink coffee each day — almost two-thirds of us — than any other beverage. Even water.
But the cost of the beans for that cup of Joe recently touched their highest level since the 1970s.
My go-to coffee order is a 16-ounce soy latte. On Memorial Day, I got it with an extra shot. Yes, I was working on the holiday. The order cost $7.20. Not cheap.
Farther back in the supply chain, the price of coffee benchmark “robusta” hasn’t been this high in 45 years. “The raw commodity, the crop has been coming in very weak,” said Chris Barrett, an economics professor at Cornell University.
Climate change has a lot to do with that, he said.
Robusta is the basis for espresso and instant coffee. Vietnam and Brazil are its top growers, and right now, both nations are suffering droughts “There’s just much less available,” Barrett said. “So roasters have been bidding up the price.”
That shortage comes as coffee consumption is growing around the world, said Spencer Turer of the consultancy Coffee Enterprises.
“It’s not just the North American consumer, it’s not just the European consumer,” he said.
Take China, where major coffee retailers have expanded in recent years. Discounts and coupons have helped that market grow.
This supply squeeze amid growing demand has helped push the price of beans 20% higher so far this year, said Michael Halen, senior restaurant and food service analyst at Bloomberg Intelligence.
“But that’s not going to show up, you know, at the store level right away,” he said.
A company buying in big volume — like Starbucks — locks in purchase prices ahead of time. “They’re securing pretty significant amounts of coffee, 12 to 18 months in advance,” Halen said.
Even when higher costs are passed on to the consumer, you might not notice. It turns out that makes up just a small fraction of what your local coffee shop charges.
A big part of my $7 and change is going to processors, wholesalers, retailers and transporting those beans. It’s enough to make you want to switch to tea.