Why We Will Pay More For Our Coffee

With coffee bean futures at 47-year highs, we can predict the trajectory of coffee prices.

So let’s take a look.

Coffee Bean Prices

With Arabica coffee bean futures and the lower quality and less tasty Robusta beans both touching record highs, the world’s largest coffee maker–Nestlé–is raising prices.

It’s all about supply and demand.

Worried about supply, coffee roasters have been accumulating inventory and farmers, awaiting a price hike, have the incentive to hold onto their beans. The steep price jump began this month after a severe Brazilian drought during August and September. Then, Brazil had heavy rains in October that might have withered the crop. In addition, EU laws on deforestation, if approved, prohibit importing beans grown on deforested land. Add to all of this Trump tariffs and you have “the perfect storm” that Vietnam did have with its poor weather.

At the same time, on the demand side, tastier drinks have elevated the number of daily coffee drinkers, and coffee is increasingly popular in China:

Starbucks

Starbucks, though, told investors that its same store sales in China are down 14%. Because Luckin, Conti and other Chinese chains attracted more customers with discounts, Starbucks’s new CEO said they need to “better understand the challenges.” At Starbucks, both foot traffic and average spend per person dipped. Still, China just surpassed the U.S. with more coffee shops.

Our Bottom Line: Demand and Supply

On my supply and demand graph, when supply went down and demand went up, then equilibrium price moved skyward:

Still, Brazil’s coffee output far exceeds everyone else:

My sources and more: To explain rising coffee prices, we had slew of possibilities including the Financial Times and Yahoo Finance.  Next, for our Robusta facts, Bloomberg had the best article (ungated). Then, for some of Brazil’s drought facts (and also a frost), Reuters and the Global Coffee Report were ideal. I should say that the USDA predicted Brazil’s harvest would rise but this was during June, before the drought.