Caffeine is a necessity for many people and statistics show that around 30-40% of the world’s population consumes coffee every day. If you happen to fall into that category, prefer coffee to chai and can’t get your morning started without a cup of coffee. Here is a warning that your coffee-drinking habits are about to make your budget more expensive. Why? Let’s start with the basics!
The Surging Costs of Coffee
Brazil and Coffee, and the Supply Chain Logistics
Land Problems and Climate Change
The Pandemic and the Rising Labour Cost
Coffee Leaf Rust
Supply, Demand, and the Trend Factor
The Surging Costs of Coffee
The process of production of your coffee takes up to five years. That includes growing it in the nursery, picking up the cherries, removal of raw beans, and drying them. Later being sold to the processors and shipping it. Coffee is grown by millions, including by farmers in countries in Latin America, Africa, and Asia where the climate is suitable for it to grow.
Mainly there are 2 types of coffee: Arabica and Robusta. Arabica has 1/2 as much caffeine as Robusta. 70% of the world’s coffee is Arabica, which has a sweeter and softer taste. Grows within a quite narrow temperature range and is particularly sensitive.
Robusta, as the name implies, is robust, strong, and contains twice as much caffeine as Arabica; it is consumed by approximately 30% of the world’s population, which is stronger and harsher in taste and counts as your instant coffee.
Apart from this, both species’ roots require a specific set of environmental conditions to grow, needing a temperature between 18-21 degrees Celsius. Anything more or less than that can stunt the growth of the plant or make it freeze before it reaches a certain level of elevation. It also requires proper amounts of rain and temperatures during the day and night as well.
The factors that come into play in the surging prices of coffee are listed below:
Brazil and Coffee, and the Supply Chain Logistics
Although coffee brands such as Nestle are seeing high sales. While Brazil is the place to get your coffee, the country is currently facing a shortage of containers and vessels for the supply of coffee. Everything is taking a long time to get from one place to another as compared to before. And this problem is not just limited to Brazil. The world is lacking sufficient containers. Most of the coffee was stuck in transit due to the pandemic. The other delivery challenges that Brazil’s supply chain is facing are congestion at ports and scarcity of truck drivers to move the coffee domestically.
Shipments from Asian countries have been on a decline with dwindling fastener inventories. Flying in coffee is one of the other factors driving up shipping prices. The belief is that coffee has to be roasted freshly for its flavour. This leads to coffee being roasted in the regions where it’s being exported and not where it is produced, increasing the carbon footprint that follows another point.
Land Problems and Climate Change
The coffee industry is vulnerable to climate change. In recent years, rapid climate change has made it more difficult to cultivate coffee. It was estimated by Time magazine in 2018 that by 2050 the land used to produce high-quality coffee could become unproductive. Other claims include that Brazil could lose 79% of its most suitable coffee-growing land. Under a moderate climate change scenario, the world could lose half of its prime coffee-growing land.
Climate and environmental changes are happening and there’s no denying the fact. Brazil has been through some rough weather conditions, which is one of the major factors that influence both the price and the production of coffee. The world’s leader in coffee production has seen both drought and frost in the last decade and again. The drought resulted in the loss of 30% of the world’s Arabica coffee, as estimated by the international coffee organization. Brazil is not the only country that is affected by weather-related events such as earthquakes, hurricanes, and snowstorms. The world is currently facing the global challenge of adapting coffee to changing climates all around the world.
The weather is becoming more extreme around the world due to climate change. When crops were damaged in 2020 due to other disasters the supply of coffee was diminished. The entire supply chain has been adversely affected by an imbalance between the lower supply of coffee and the expected increase in demand. The rise in temperature adversely affects the viability of coffee, especially Arabica coffee.
The toll also includes 60% of the wild species of coffee being at risk of becoming extinct because of climate change. Rapid climate change requires farmers to push the elevation levels at which coffee grows in the mountains. Resulting in low-quality beans. Higher temperatures and warm climates also mean an open invitation to pests and fungi.
The Pandemic and the Rising Labour Cost
After the pandemic, the globe has seen a rise in inflation. Students who were studying abroad had to leave their dorms and universities with uncertainty. Most of these students and people who were living abroad moved back to their homes. This results in a gap left in the market, which has been expanding ever since.
This is because most of them did not return to foreign lands to complete their degrees or changed their jobs completely. This brings us to hospitality businesses offering attractive prices for the available staff. The prices of everything on your menu would therefore increase, along with their wages.
Another factor contributing to inflation is a shortage of labour, as there is a need for more workers in the sector with the increasing number of jobs in the recovery economy. Besides getting coffee right from the place where it was produced, getting it in your hands involves labour costs in all different segments, right from picking them up from the farm to getting them served to you in your cafĂŠ by your barista.
Everything and everyone are connected in the world, and yes, that also means the ongoing war in Ukraine as well as the constant lockdowns in China. Which is affecting the global supply chain. As a result of freight costs, global food prices are rising, making the price of your coffee jump through the roof. As a result, we are left with the next situation, which is the fluctuation of supply and demand.
Baishali Das Adhikari
Coffee Leaf Rust
Coffee leaf rust is making headlines. You might have read about it and wondered. Here is what coffee leaf rust looks like. This coffee rust fungal disease is taking over, causing a possible coffee leaf rust epidemic, and has been one of the socio-economic factors influencing the prices of coffee. Coffee rust usually appears as a yellow, dust-like powder that settles on the leaves, making the leaves dry and fall off the branches. The increase in moisture, as well as temperatures, can lead the fungus to multiply and grow. Leaf rust can destroy most of the production. Coffee leaf rust makes it hard to predict the lifecycle of the coffee plant. New, aggressive fungus variants of coffee rust were first discovered last year in May, increasing fear among the public.
Not only this but the book Coffee Is Not Forever: A Global History of the Coffee Leaf Rust written by Stuart McCook already predicted that coffee could get more expensive. The countries that continue to fight the coffee leaf rust include Columbia, Mexico, Brazil, and more in 2022.
Supply, Demand, and the Trend Factor
As mentioned before, every industry has its own changes in demand and supply factors. In the case of the coffee segment, it is not balanced. The demand for coffee is greater than the supply, considering everything mentioned above.
Remember when social media went crazy and obsessed with everyone whipping the Dalgona coffee trend back in 2020? The world is a kaleidoscope of many colours. Just as there is much diversity, there are different cultures. This gives rise to the various ways in which people enjoy their coffee.
The trends today are shifting towards more people wanting to try high-end coffee roasters, different flavours, newer brewing methods, artisan coffee and special drinks, sustainable coffee and so much more. The prices have also shot up at the rosters and the supermarkets. The younger generation has a say in what’s popular, making the trend. Which disrupts the demand and supply chain, leaving you with an overpriced cup of coffee even in your cafĂŠs. Apart from that, there’s a growing trend to have their green beans flown in, rather than brought in by the boats with the belief that coffee tastes the best when roasted freshly, at the place of its consumption.
Conclusion
Given the scenario, coffee prices are estimated to rise further. The rapid climate change, increasing demand, and trends that are becoming more obvious have directly affected the way coffee is traded, having a negative impact on the global supply chain. Further rapid climate change, land problems, and coffee leaf rust have negatively impacted the production of coffee, making it hard to grow, which also brings us to the point that coffee could be considered more of a luxury than a commodity in the future.
FAQs
What are the two main types of coffee?
Arabica and Robusta are the two main types of coffee.
What are the factors that are affecting the prices of coffee?
The supply chain logistics in Brazil, land problems, rapid climate change, fluctuating demand and supply, changing trends, shortage of labour, coffee leaf rust disease, etc. are some of the factors affecting the prices of coffee.
Is coffee going to get more expensive in the future?
Yes, keeping the current scenario in view coffee prices are likely to surge in the future.
