Coffee Supply Plummets, Prices To Skyrocket for Another Year
As coffee trees wither and die in droughts, replacement trees can take up to five years to grow.
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Coffee prices, already at an unprecedented high, will be climbing for the foreseeable future as farmers face severe supply shortages worldwide.
Harsh weather conditions in South and Central America, as well as Southeast Asia, are disrupting the global supply of coffee beans, driving prices up to $4,300 a ton as of this week, compared to $2,500 a ton at the end of 2023.
The head of research at the Center for Indonesian Policy Studies, Aditya Alta, tells the Sun that coffee prices have “reached a 45-year high,” after the price of this year’s harvest in Indonesia increased almost 16 percent.
Lavazza’s CEO, Giuseppe Lavazza, said last week that the company has “never seen such a spike in price.” He believes that coffee prices will not go down anytime soon, but will remain “very high” for the foreseeable future.
Vietnam’s coffee crop potential for the next year will likely be the lowest in 13 years, while prices for robusta beans are already increasing 40 percent this year. Poor rainfall in the country has caused “irreversible damage” to many coffee blossoms this year, Bloomberg reported.
Brazil, another top exporter, will likely face a crop shortage of 10-15 percent during the 2024-25 season. While prices are moving marginally lower today in the country after heavy rainfall, the price of Arabica coffee hit a three-month high last week.
As coffee trees wither and die in droughts, growing replacement trees can take up to five years, which leaves the supply of coffee cut short until the new trees can produce fruit.
A senior research fellow at the American Institute for Economic Research, David Herbert, tells the Sun that the bean supply shortage will have a tangible effect on coffee drinkers in the near future. “Prices will keep increasing, and the actual cup of coffee that you purchase from Starbucks might get a little smaller. Coffee shops might also adjust,” he said.
“Seating space may be smaller, free refills will probably go away, and people will have to pay more on a ‘per cup’ basis.’ Businesses could also choose to keep the price the same and sell less coffee,” he added.
Coffee producers stand to gain from supply shortages, as they profit from selling beans at higher prices in the short term, Mr. Alta said. The supply shortage could also mean a good business opportunity for many coffee producers to help bolster the industry in the near future.
“The higher price of coffee could help create a lot more jobs in terms of cultivating and growing coffee trees in the immediate term, and the roasting of coffee beans in the long term,” Mr. Herbert said.
Meanwhile, a European Union regulation set to go into effect in December will restrict coffee imports that have any ties with deforestation. This will tighten the coffee market in many European countries and may drive coffee prices up even further.