Why Coffee Prices Are Soaring (Again)

https://www.nytimes.com/2024/12/28/business/coffee-prices-climate-change.html

Why Coffee Prices Are Soaring (Again)
Wholesale coffee prices are trading near a 50-year high because of shortages related to extreme weather and increased global demand.
By Santul Nerkar
Dec. 28, 2024

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Despite being one of the world’s most consumed beverages, coffee can be grown only under very specific conditions, requiring misty, humid and tropical climates, with rich soil free of disease. Aside from a small batch grown in Hawaii, the United States produces little coffee domestically. It is the world’s largest importer of the beans. The scarcity of sources leaves global coffee prices susceptible to the effects of extreme weather.

According to the U.S. Department of Agriculture, around 57 percent of the world’s coffee production last year came from arabica beans, and Brazil is the largest exporter. But a severe drought there this summer devastated the harvest, which typically runs from May to September, and it could threaten next year’s crop as well.

In Vietnam, a severe drought followed by heavy rains harmed the world’s largest reserves of robusta, which is the second-most-popular variety globally and is commonly used in instant coffee blends.

Even as production has faltered, global demand has increased, partly because of the rise in coffee consumption in China. A June report from the U.S. Department of Agriculture found that China’s coffee consumption had increased more than 60 percent over the past five years.

Other factors have also played a role. In 2021, supply-chain bottlenecks caused by the Covid-19 pandemic combined with political instability in South America to slow exports, causing prices to shoot up. But even as high inflation has moderated, many consumer companies are making plans to charge more, including big ones that are better positioned to absorb price shocks. Nestlé, the world’s largest coffee maker, announced last month that it planned to raise coffee prices next year and shrink the size of its packages. J.M. Smucker, whose brands include Folgers and Dunkin’ Donuts’ at-home coffee, announced price increases in October.

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