Coffee prices are going up due to weather issues around the globe and prolonged supply chain problems.
Brazil has been specifically impacted by bad weather with a drought, followed by a frost. According to The Wall Street Journal, Arabica coffee costs were almost double what they were are the end of 2020 at a certain point last year.
The Journal reported, “Arabica coffee futures closed Tuesday at $2.37 a pound, after wrapping up January a little below monthly highs of $2.44. Futures traded at around $1.30 during the same time last year. They finished 2021 up 76%, the largest annual percentage gain since 2010, bringing higher prices for yet another raw material at coffee shops and breakfast tables.”
Nestlé, which is one of the world’s largest coffee buyers, sells home coffee via Starbucks and Nescafé. It was mostly able to steer clear of hiking prices in 2021, but the company’s chief financial officer noted in October that higher costs are anticipated this year, per the outlet.
Small businesses have continued to be impacted by supply chain issues and delays, pushing their need to increase prices for consumers, and harming the economy in the process.
J.M. Smucker Co., an Ohio-based company, sells coffee via the Dunkin’ Donuts, Café Bustelo, and Folgers lines. It increased prices in reaction to the weather and supply chain issues that affected its profit, Chief Executive Mark Smucker said during a November earnings call.
Coffee shops are also feeling the impact of the rising prices. The Journal noted that a cafe in Columbus, Ohio, called “Cafe Kerouac,” increased its prices for every latte and espresso drink by twenty-five cents at the start of the year.
It wasn’t just the cost of coffee beans that drove the store to make the shift. The collection of higher prices for syrups, beans, and portable cups made the adjustment necessary.
Another store, Café Du Monde, of New Orleans, had to increase prices for three types of its canned coffee by an average of 5% due to pricier beans and cans. “In the past, the company has hedged against higher costs using futures, said Jay Roman, president at the coffee shop. Mr. Roman said the company would likely buy futures again but prices are too high,” the Journal added.
“So far, there haven’t been too many downticks,” Roman noted.
Starbucks, however, said its coffee costs were secured for 14 months on an earnings call in late October. Megan Lagesse, a company spokeswoman, said the increasing coffee prices haven’t been a part of any price hikes felt by consumers.
“Coffee’s continued advance comes as many other commodities that surged to start 2021—such as sugar, wheat and lumber—retreated from those highs,” the Journal added.
The outlet noted that much of the increase in coffee costs can be blamed on weather problems, and the costs might decrease if weather forecasts get better. However, the increase in prices for shipping and freight services has contributed. “The Baltic Dry Index, a proxy for measuring global freight and shipping rates, rose 62% in 2021, its biggest percentage gain since 2016,” the outlet noted.
The impacts of inflation and supply chain problems continue to impact the daily lives of Americans and are a main concern for many of them.
A recent Gallup poll found that “[n]early eight in 10 Americans expect inflation to go up, including half who anticipate it will increase ‘a lot.’ A similar percentage of U.S. adults, 78%, expect interest rates to rise.”