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How The Increase In Coffee Prices May Be A Blessing In Disguise

Frost this year and drought last year have contributed to reducing the crop size of Arabica coffee. And if that wasn’t enough, locust swarms in Ethiopia, Kenya, Tanzania and Uganda have been destroying coffee and other crops, putting pressure on worldwide supply at a time when demand is increasing.

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Profit by going without…

The other day I went to meet a friend at the local branch of a world famous coffee chain and was surprised to see the cost of a cup of coffee. He told me that the price has been rising throughout the year and asked if I hadn’t noticed that things in general were up?

Truth be told I did notice. Last post I mention about having to change hosts and one of the reasons why was that I was trying to lock in the price of hosting by paying in advance because all price plans were increasing!

And it’s not only hosting and electrical goods. Everything seems to be going up pretty quickly! Anyway I did a little digging around to find out why the cost of coffee in particular is rising and found out some interesting facts about what is going on.

The Weather

Brazil is the worlds largest producer of coffee. Unfortunately they have experienced some weather challenges this year which will affect next year’s crop (as they are already harvesting 2021/22 crop).

Frost this year and drought last year have contributed to reducing the crop size of Arabica coffee. And if that wasn’t enough, locust swarms in Ethiopia, Kenya, Tanzania and Uganda have been destroying coffee and other crops, putting pressure on worldwide supply at a time when demand is increasing.

The result is that this years crop has fallen short of expectations and the knock on effect is that the industrial coffee buyers have been placing bulk orders early (trying to lock in todays prices), which has in turn pushed up the price for all coffee imports for this year and next.

With the coffee supply chain already under pressure and consumer demand remaining high, the recent severe weather that damaged Brazil’s crop could spell more trouble for coffee prices and food manufacturers that source large amounts of beans used to make the beverage.

As inflation fears ripple throughout the food industry, a number of CPGs are announcing price hikes to offset the increased costs in their supply chain. Many coffee-dependent companies are among those in the mix.

source: Surge in coffee prices to a multi-year high could impact major CPGs, Food Dive, July 29, 2021, Lauren Manning, Surge in coffee prices to a multi-year high could impact major CPGs | Food Dive

 

Supply Chains

The logistics of getting the coffee beans to the roasters and then to the end users is quite complex. There are many moving parts involving thousands of people worldwide.

So with the recent restrictions and bottlenecks that have built up throughout 2021 we are now experiencing supply chain disruptions that are hitting the coffee industry quite hard.

According to reports, a longstanding imbalance of shipping containers around the world is spiking transportation costs for coffee, which could end up spiking the cost of coffee for end consumers.

“It is a systemic issue. It is now more expensive than in the last five to 10 years to bring coffee to the consumer.”

source: Coffee prices soaring due to “systemic” coronavirus supply chain disruptions, Grocery.News, March 10, 2021, Ethan Huff, Coffee prices soaring due to “systemic” coronavirus supply chain disruptions

As with the coffee beans themselves, companies are trying to lock in prices now as it is uncertain if supplies can be guaranteed and supply routes will be open. The situation has lead to a reduction of US coffee stockpiles which may lead to supply not being able to meet demand.

For now, many merchants are trying to hold the line on price increases as they work to lure customers back to cafes and restaurants. There’s steady growth in coffee, though the out-of-home segment could take two to three years to return to pre-Covid levels, according to David Rennie, head of Nestle SA’s coffee brands.

source: The World Is Facing a Coffee Deficit in Supply Chain ‘Nightmare’ – Bloomberg, Bloomberg, 23 March, 2021, Marvin G Perez, Fabian Batista, Manisha Jha

Alternative Points of View

It looks like the price of coffee will continue rising for the next few years, which isn’t great if you enjoy coffee or are dependant on it! Unfortunate as it is, if you’ve been thinking about getting rid of your coffee dependancy, now might be as good a time as any to try.

A high percentage of people get their daily caffeine fix via coffee, and although caffeine doesn’t cause too much harm in moderation, many people over caffeinate themselves without realising it which could be negatively effecting their sleep at night and their productivity during the day.

By slowly reducing the amount of caffeine you consume each day you can start to feel the benefits of your body adjusting back to being more in line with its natural circadian rhythm; which can help you have a more refreshing and deeper sleep cycle which in turn will help you think more clearly throughout the day, and naturally boost you energy levels to where they should be.

The money that you save from buying coffee could be used elsewhere, or if you can’t go without coffee, be used to buy as much as you can for storage, just like the industrial users and companies are.

Review

The rising cost of coffee and caffeine doesn’t seem to be ending anytime soon. As of this writing there are fears that the lock downs and restrictions will be put back in place which would eventually lead to shortages and delays in you being able to buy and consume coffee.

If you love coffee, buy in bulk like the companies do and keep it in storage. Alternatively, you can use this time as a chance to break your caffeine dependancy and profit from the savings that you will make.

Either way it’s up to you how you play this, so do what works best for you .

Afterword

“Every calamity is a spur and a valuable hint.”

Ralph Waldo Emerson
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