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Experts warn that coffee lovers and coffee shop dwellers are likely to see a recent increase in the price of a cup of joe.
The price of Arabica coffee beans, the high-quality beans found in most restaurants and stores, has soared this month, recently hitting $US3.50 ($5.45) a pound.
That’s up 70% this year, leading to the highest crop prices since 1977. this way.
Adjusted for inflation, US$3.50 (US$5.45) would have been about US$0.66 (US$1.03) in 1977. Then prices rose because frost killed more than a billion coffee bean trees.
And today, experts say, climate change is to blame.
“We’ve seen significant drought in some of the key coffee-growing areas of the world, places like Brazil, which is the largest exporter of coffee in the world,” said David Ortega, a professor of food economics and policy at Michigan State University.
Ortega studies the supply chain and how ingredients move from farmers to the grocery store.
He said droughts, frosts, floods, high temperatures and other unpredictable weather conditions played a role in reduced yields in Brazil and Vietnam, another major coffee exporter.
Vietnam grows robusta beans, a slightly lower quality bean used for products such as instant coffee.
“We’re going to see these types of (climate) events just become more frequent in the future.” And so we need to start taking this seriously and investing in agricultural research and development so that we can mitigate and address the impact of climate change on our agricultural production and agricultural system,” Ortega said.
“One impact of this is an increase in costs, which then translates into an increase in the price for consumers,” he added.
Consumers will feel the increase, but so will the bakeries and distributors who give them the takeout cup.
“Climate change is the #1 factor in increasing and changing prices in the coffee market. This creates a lot of stress on the market. Supply is down and demand is up,” said Jackie Newman, vice president of World of Coffee Inc.
World of Coffee is a family business that processes raw green coffee beans and packages them for private labels, foodservice and coffee shops.
Newman said the company’s products are served to thousands of customers across the country every day.
“We will try to be as fair as possible and eat as much of the price as we can. Obviously, people still need their cup of coffee in the morning,” Newman said. “But we also have to make sure we account for all of our costs, not just the increase in coffee, but the increase in packaging and labor costs.”
She expects coffee prices to rise from 50 cents to US$1 ($1.56) a pound in the coming days.
“People are very responsive to coffee prices and that affects everyone downstream. Farmers are affected because they have very low supply. Green coffee sellers are affected because they don’t have as much coffee to sell and the demand is high,” she said.
“The roasters are extremely affected because the price is so high and we still have customers to fill orders for. It really trickles down the chain and affects the everyday consumer,” Newman added.
“There just isn’t enough coffee to go around.”
The forecast for other crops may follow a similar trend.
“If we look at the recent floods in Europe, for example, which affected the region of Valencia [in Spain]a key agricultural production region in this country, it had some pretty detrimental effects on things like oranges,” Ortega said.
“If you look back, not too long ago, two years ago, we had a mega drought out west in places like California where a lot of our specialty crops are grown. Things like lettuce that saw a significant price increase a few years ago, even beef production was affected by this mega drought. And we’re feeling the effect on beef prices right now,” he said.
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