Throughout 2024 and early this year, you may have heard reports of rising coffee prices, from the bean to your cup at the local cafe. While some numbers bandied about may sound extreme, we do need to rethink they price we pay and maybe the way we consume coffee.

In this piece, we’ll explain recent events that have lead to these increases and try to point the way forward (with very little confidence).

The C-Price

It all starts here for pricing. The C-price or the commodity price of coffee, is the benchmark for raw unroasted coffee bean. 

The price is set at the commodities exchange in New York for 100% Arabica coffee beans and sets the baseline for contracts involving coffee worldwide. It’s priced in US dollars per pound. For specialty coffee to exist, farmers must work diligently to process their coffee with care and expertise not always rewarded by the market price. 

Because it doesn’t differentiate based on quality, the baseline has premiums added on for things like quality, sustainability and any other metric we value. So when the C price rises, so to does the cost of all coffees. Premiums are still added on, as its the only way to encourage growers to maintain high standards so we enjoy great tasting coffee, therefore specialty coffee is not immune.

In the last 12 months, this price has risen from $1.80 to hitting a high of $4.40 just last month. As you can imagine, more than doubling the cost of our product is a huge burden for roasters.

Weather in the Coffee Belt

Coffee isn’t the most robust plant. Found in Ethiopia in the 14th century, coffee plants grow well at high altitude between the tropics. They’re not fond of frost, extreme heat and require rain at the right time to have fruit set, and not to much rain when the fruit are developing. All this with changing weather patterns in remote regions.

Brazil had been hit with it’s worst drought in 70 years, resulting in lower harvests. It’s the worlds largest producer, accounting for a third of world production, which means a huge hit for volumes. Their next harvest is also expected to be low as the plants recover from this stress.

The worlds second largest producer, Vietnam, has had 3 years of poor conditions. Though mostly growing Robusta coffees, large commercial roasters that can’t access what they need, will start buying up low grade Arabica coffees to balance the shortfall.

EU deforestation laws

The European Union has recently limited the use of goods that are sourced from deforested land. Any land that has been deemed deforested since December 31 2020, will not be able to export goods grown from it. That means for coffee, farms need to be accredited by the EU for export to occur.

That’s all well and good for farmers with size and means, but most around the world, especially in Africa, farmers generally have a hectare each. This makes it impossible to be accredited and excludes them for this large market. The effect has been for large commercial traders and roasters in Europe to stockpile coffees before the cut off date for purchasing from deforested or non accredited farms.

Freight and logistics

After recovering from the sharp increase in shipping costs post covid, 2024 saw challenges on multiple fronts driving costs back up.

The uncertainty surrounding the ongoing war in Ukraine, conflict in the Middle East with Israel, Gaza and Lebanon all drove oil prices, which makes up 30-40% of shipping costs. Add to that the issues in the Suez Canal due to Houthi rebels in Yemen attacking ships there, meant shipping lanes were disrupted adding costs to each journey.

Add to this a shortage of shipping containers in large export markets of Brazil and Vietnam, meant prices increased further.

A perfect storm

This has lead to prices unseen in Australia for coffee. Add to all this the Australian dollar of 64c to the US dollar and prices are even higher still. There’s almost no contributing factor to coffee prices that isn’t putting pressure on.

Where to from here?

There is no doubt that these prices are exceptional, a little relief may well be around the corner, but until then, we have to deal with these prices by raising the price of coffee. With market volatility exacerbated by trade tensions, we can’t be certain which way things could go, but for us the quality of the coffee comes first. 

We’re not sacrificing bean quality or changing premiums paid to farmers as we’re in coffee for the long term. Any shortcuts end in pain somewhere down the line, so supporting each other through the tough conditions mean wins for all of us.

Let’s hope we can still all get a great coffee affordably, but for the moment, consider those who rely on coffee for their livelihood and realise cafes and roasters aren’t trying to rob you blind, they just want to keep serving great coffee.

Best Regards,

Daniel Jones

Owner and coffee nerd