Your daily coffee habit is about to get more expensive

The roasters have a problem. The cost of the beans they import has skyrocketed this year, leaving roasters wondering if their customers – from grocery stores to coffee shops to people looking for their daily latte – will tolerate higher prices.

Extreme weather conditions damaged crops in Brazil, the world’s largest coffee exporter. In addition to pandemic bottlenecks and political protests that have blocked exports from Colombia, this has pushed up the cost of beans by nearly 44% in 2021.

This is not yet a problem for Starbucks or Nestlé, coffee giants who stock up well in advance and won’t have to deal with price hikes for a year or more. But some small roasters have already had to increase their prices, and others expect to do so, fearing to alienate consumers.

“These increases make me nervous because one of the main principles we operate on is being able to make specialty coffee and making the prices affordable,” said Quincy Henry, co-owner of Campfire Coffee in Tacoma, Wash., Which opened. his doors. in March 2020 at the start of the pandemic. “It makes me think about how we’re going to survive. “

Mr Henry might have to raise prices or cut costs elsewhere, for example by using cheaper supplies to roast coffee. If he decides to charge more than the current $ 4.39 for his 12-ounce slats, he said, he needs a price that “won’t scare people” as the economy shrinks. straightens.

“We are still at a stage of the pandemic where people are price sensitive,” he said.

Mr. Henry remembers when Brazilian arabica beans were among the cheapest he could buy, locking them in for $ 1.90 a pound. His last order, at the end of July from the same importer, cost him $ 2.49 a pound.

Behind this increase is an increase in the price of beans that will be delivered to roasters in months. Traders call these “coffee futures” and they serve as a benchmark for buyers around the world. A pound of arabica beans on the futures market, typically $ 1.20 to $ 1.40, broke above $ 2 in late July, the highest since 2014. On Wednesday, the coffee futures price was 1.84 $ per pound.

Prices topped $ 1.40 at the end of April, as weeks of political protests rocked Colombia, the world’s third-largest coffee exporter. The country exported 345,000 60-kilogram bags of coffee in May, just a third of its usual monthly shipment, according to data from the non-profit National Federation of Coffee Growers of Colombia.

Colombia’s exports have since rebounded, but those of other big producers, like Vietnam, have been slowed by shipping bottlenecks as the global economy struggles to reopen after a year of lockdown. A shortage of shipping containers has restricted exports, analysts say, and has also caused shipping costs to rise sharply.

Jeff Taylor, co-owner of Bird Rock Coffee Roasters in San Diego, said shipping bottlenecks delayed his usual purchase of specialty arabica beans from El Salvador by almost a month and a half. So he had to buy smaller amounts of coffee from the United States as a temporary fix. Mr Taylor has yet to raise prices, but he expects him to do so by the end of the year.

The big question is what will happen to the supply from Brazil. The country, which exports an average of 34 million bags of coffee beans per year, has been hit by a series of climatic shocks – drought and plunging temperatures.

Temperatures last month fell below 27 degrees Fahrenheit, about half of what is normal and the kind of cold that can damage or even kill coffee trees.

“An intense cold frost normally burns the leaves and branches of the coffee tree, reducing the quality and quantity of coffee bean production,” said Kevon Rhiney, assistant professor in the geography department at Rutgers University, where he specializes in the coffee industry.

July also marks the start of the wildfire season in Brazil. After this year’s drought – the worst in nearly a century in parts of the country – it could be devastating.

If the damage is severe enough, growers may have to ‘pull’ their trees or cut them down to the base, which means it will be three years before the next harvest, Rhiney said. If they only need to prune branches, harvest could be delayed for a year.

Often the decision comes down to whether the grower can afford to pay someone to prune or square the trees. To do nothing is to risk continually poor harvests which could spill over into the world market.

Salomón Shamosh, managing director of Boicot Café in Mexico City, buys her coffee exclusively in Mexico, but said prices were rising there due to problems in Brazil.

“There is so much demand for coffee in the United States and Europe that Mexican distributors are increasing their prices,” Shamosh said. “We have to pay for it,” he added, because if they don’t, “then the product doesn’t stay in Mexico”.

The cost of coffee beans from the Mexican states of Veracruz, Oaxaca and Chiapas has increased by 10-15% in the past three months. Mr Shamosh said Boicot Café may have to increase the price of its cold beers, which start at 49 pesos, or around $ 2.50, by January.

It’s only at the end of this year’s harvest season, next month, that Brazilian growers will decide what to do, and what happens next could determine whether even the biggest growers are able to delay price increases.

“By September, we’ll know how the damage might impact next year’s harvest,” said Kona Haque, research manager at ED&F Man, an agricultural commodity dealer.

If prices stay high long enough, even Starbucks and Nestlé will have to consider raising prices, although they are likely reluctant to do so.

“Roasters will think twice whether they pass this cost on to consumers and not affect consumption,” Ms. Haque said. “If they think people are worried about inflation, mortgages or what will happen to future jobs, then they won’t.”

Starbucks buys coffee 12 to 18 months in advance and continually buys coffee during the pandemic, its chairman, Kevin Johnson, said on an earnings call last month. With these advance purchases and the company’s ability to store large quantities of coffee to protect against rising prices, “we have locked in our price hedging for the next 14 months,” he said. declared.

Small roasters can’t last that long.

Donald Schoenholt, president of Gillies Coffee, a Brooklyn merchant who has been around since before the Civil War, has already raised the prices he charges his customers, mostly small distributors who resell the beans to cafes, hotels and grocery stores. Several products, which sell for between $ 5 and $ 9 a pound, already cost 55 to 65 cents more per pound.

Mr Schoenholt, 76, said he was taking it without hesitation. Having worked in the industry since 1963, he’s seen price hikes like this before, but he notes that the rapid increase this year is plaguing some of his customers and competitors.

“Right now there is a lot of anxiety,” he said. “The change in costs becomes confusing and you start making business decisions that you wish you weren’t making. “