Hey there, coffee fans and shop owners!

If you’ve had the (dis)pleasure of purchasing coffee beans recently, there’s no doubt you’ve noticed that prices are on the rise. While it’s not unusual for prices to fluctuate, this recent jump could be causing some concern.

In this article, we’ll break down what’s behind the rise in coffee prices, similar price spikes in the past, understanding the numbers, and what to anticipate for the future to keep your business brewing strong!

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Those who complete the survey THIS year will continue to receive subsequent annual reports for free, regardless of future participation (though we of course hope you continue to share your experiences with this ever-growing and important community of independent coffee shops)!

Since the introduction of coffee into the global market in the 17th century, its price has been shaped by the evolution of production and distribution methods, historical events, and ever-growing demand. 

The 20th century saw coffee prices influenced by industrialization and globalization, generally stabilizing them. In 1962, the International Coffee Organization (ICO) was formed to facilitate agreements between coffee-exporting nations, bringing additional consistency to the market until the 1980s when the ICO collapsed. 

By the 1990s and 2000s, coffee prices became more volatile due to overproduction, changing consumer tastes, and the end of price controls. Today, coffee prices remain unpredictable, shaped by global market trends, environmental conditions, production costs, and political and trade factors.

In January 2010, the price per pound of coffee beans was $1.40. By the middle of the year, coffee prices began to increase rapidly, soaring over 100% to $3.00 per pound in May 2011, the highest relative price since the late 1990s. What was to blame for the sudden spike? A classic case of supply and demand mismatch. 

In 2010, a myriad of events led to reduced coffee bean production. Severe weather in major coffee-producing regions like Brazil and Colombia significantly damaged crops and led to reduced yield. Colombia’s supply was dealt another blow by an outbreak of coffee leaf rust, a fungal disease that damages and often kills coffee plants. The combination of poor harvests and pest outbreaks greatly affected coffee bean harvest, resulting in a tighter global supply.

At the same time, global demand for coffee surged, especially in emerging markets like China and India, which placed additional strain on already limited supplies. The rise of specialty coffee also played a role, as consumers increasingly sought high-quality beans. 

The whipped cream on top of this very expensive mocha was speculative trading, which resulted in a rapid buying of coffee futures in response to supply disruptions, further driving up costs. This perfect storm of low supply, high demand, and the projected costs of coffee catapulted prices to record highs, highlighting the vulnerability of the global coffee market.

By 2012, the cost of coffee dramatically dipped, returning to pre-surge prices of $1.40 per pound by year’s end. This shift was largely due to the supply-demand balance tipping back in favor of consumers. Improved weather conditions, better pest control, and a boost in coffee bean planting all contributed to a surge in supply. As concerns over shortages eased, the speculative frenzy in the coffee market also began to subside, leading to a natural price correction. Additionally, the once-rapid demand growth in emerging markets slowed, and in some countries, it even began to level off. As the market stabilized, coffee prices found a more sustainable balance, offering welcome relief to both producers and consumers.

Since the latter half of 2023, the market price per pound of coffee has been consistently climbing, arriving at the all time nominal high of $4.34 just earlier this month. That’s over 250% higher than prices as recent as midyear 2023! As in 2010 (and in most market price fluctuations for that matter), this price hike can once again be attributed to those three magic words:✨Supply and Demand✨

Today’s gross imbalance in the market state can be attributed to essentially the same sources as in 2010. Extreme weather over the last few years manifesting as droughts and irregular rainfall, fires, and frosts have wracked key coffee production regions in Brazil and other South American countries, Vietnam, Central America, and Africa alike. Coffee leaf rust is now a threat to virtually all coffee-producing regions, reaching Hawai’i (previously one of the only coffee-producing regions free of the pest) for the first time in 2020. Demand for high-quality specialty coffee continues to rise alongside general coffee consumption, particularly in China and Southeast Asia.  

Lastly, supply-chain challenges such as shipping delays, port congestion, and the rising costs of, erm, everything (i.e. transportation, fuel, labor, and production) additionally threaten market costs. 

While the challenges are significant, the resilience of the coffee industry in the 2010s gives hope for a more balanced future.

Let’s take a closer look at the numbers. 

What if I told you that even though coffee prices peaked at $3.00 per pound in 2010, and today’s price is $4.34, the difference isn’t as shocking as it seems. When you adjust for inflation (assuming 2% per year), the price of coffee in 2025 is actually quite similar to what it was 15 years ago.  While it certainly doesn’t change the amount of money you’re shelling out for beans, it may be a consolation to know that we’re facing nearly the same relative price for coffee as during the 2010 spike. 

That means if your coffee shop was around in 2010, you’ve already survived a similar price surge. If you're newer to the coffee business, take heart—you’re not alone in dealing with these challenging market conditions. And just for fun, consider the relative price of coffee in the 70s and 80s: at its peak, it nearly doubled today's price!

Looking ahead, the future remains unpredictable. Weather events and climate change are likely to continue causing disruptions to coffee yields, making prices volatile. The looming threat of tariffs and other political action may result in diminished accessibility in the U.S. market. And who knows if there’s a new, devastating pest hellbent on destroying coffee plants around the corner?

However, the surge and subsequent fall of coffee prices in the early 2010s shows us the coffee market can correct itself over time. Farmers will likely respond to high prices by increasing production. Innovation in coffee processing and production could help stabilize prices and introduce more affordable market options. And while coffee demand is unlikely to drop dramatically, higher prices passed to the customer as well as shifting consumer preferences–like a growing interest in plant-based or health-conscious beverages–may encourage some to cut back on their daily coffee habits, pushing consumption patterns down.

In short, nobody knows for sure.

Some experts predict arabica prices will drop anywhere between 8% and 30% by the end of the year, while others anticipate continued volatility, especially amid potential political moves. The actual trajectory will depend on various factors, including weather patterns, global demand, and economic conditions.

But humans have and will continue to rely on coffee to fuel us (it’s generally considered to have an inelastic demand for this reason!) and have likewise felt the ebb and flow of supply and demand for hundreds of years. Coffee is no stranger to the market and has weathered worse relative prices than those of today.

Still, current coffee shop owners are feeling the effects of these all-time nominal highs and are left to deal with the consequences. Ultimately, while the future of coffee prices remains uncertain, one thing is clear: the industry's resilience and our enduring love for the drink will keep it brewing, no matter what challenges lie ahead.

Stay tuned for our next newsletter where we discuss how to navigate these high costs! If your business has already implemented changes to mitigate effects of rising coffee prices, let us know and you may be featured in our next issue!

Thanks for reading this doozy of an article! We hope you learned something new that can inform your business or habits going forward.

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