Sticker Shock: You're Not Wrong, The Price Of Coffee Has Been Drastically Increasing

As if prices weren't high enough, you might have also noticed an uptick in the price of your morning coffee. A big part of coffee's price hike? Climate-change-fueled weather events (like the kind affecting everything from auto insurance rates to homeowners insurance availability). As Michael Hoffmann, professor emeritus at Cornell University, explained to CNN, "Climate change is getting worse. Just imagine more severe weather, rising temperatures, and the direct effect to the people working in the coffee plantations." As conditions worsen, the coffee market is sure to continue experiencing changes. Even worse, Hoffman added, "Probably for (consumers), the coffee's just going to get more expensive."

However, grasping the varied factors affecting coffee prices can be tricky. For instance, it's worth noting that Arabica futures climbed to $3.26 per pound in November 2024, the first time coffee prices had traded that high since 1977 and marking a 70% increase in price just in 2024 alone. However, while speculation certainly doesn't help coffee prices, the bigger long-term concern is the diminishing supply of actual coffee beans (the lack of which further pushes up prices). In fact, the USDA recently estimated that Brazil's 2024-25 coffee reserves were 65% less than a previous estimate, and 26.4% less than last season. This is particularly significant when you realize Brazil produces almost 40% of the entire world's coffee supply. Let's dive into how coffee prices work and what coffee-loving consumers can expect next.

A lot of different hands ultimately touch coffee during its production process. From the farmers to the processors, millers, transporters, roasters, brewers, and retailers, each step of the process from getting a coffee bean to your morning cup impacts its price. Plus, it's worth noting that, just like cocoa prices, coffee is negatively affected by commodities speculators in addition to supply issues.

Also, while roughly 60% of all coffee production centers on the more premium Arabica variety, price and supply fluctuations (thanks to the combination of unusual weather conditions and the fact that the coffee plant is highly susceptible to temperature changes) have so heavily affected Arabica that more buyers than ever have turned to a cheaper variety used in instant coffee, Robusta, to offset. This has not only affected the quality of the coffee you might find but it has drastically changed the futures market. As Ryan Delany, founder and chief analyst at Coffee Trading Academy, explained to CNN, "Coffee's a very complicated commodity. Part of that reason is because you have multiple supply and demand frameworks impacting the price."

As overall coffee bean output continues to decline (even for cheaper coffee varieties like Robusta) prices continue to rise. According to data from the U.S. Bureau of Labor Statistics, the average cost for a pound of coffee beans in October 2024 was $6.64, a 2.7% increase compared to the month prior and a whopping 60.3% increase when compared to the average per-pound cost in 2019.

Given that climate-change-fueled weather changes and disasters will only get worse in the future, chances are good coffee prices will not only not come back down, but will continue to increase. With that said, which coffee brand you prefer could ultimately affect what price increases you personally experience. For instance, the president of Italian coffee brand Lavazza, Giuseppe Lavazza, publicly said over the summer that he anticipated a 10% increase in the brand's supermarket coffee in the UK. The brand also explained to CNN, "A combination of poor harvests, climate change, the war in Ukraine, conflict in the Red Sea, the intervention of speculators and the strong dollar has created a 'perfect storm' for the coffee industry that has seen prices spiral since the pandemic." Nestle, which makes both of the popular Nescafe and Nespresso brands, will reportedly not only raise prices but also shrink the size of its coffee packs to offset cost increases (this is the definition of shrinkflation).

On the flip side, Starbucks has long utilized something known as fixed-price contracts when purchasing its beans from producers. This, combined with other hedging strategies, effectively locks in their coffee bean prices long term. This not only helps the company avoid price swings and fluctuations that could cost it more but also ensures that the company's customers don't face the same kind of extreme price hikes that other coffee brands might pass on to their customers. At least for now.