Introduction to the Rising Cost of Coffee
With her purple-and-pink hair swaying, Reneé Colón stands on a stepladder in the rented corner of a warehouse, pouring Brazilian coffee beans into her groaning old roasting machine.
The beans are precious because they survived severe drought in a year when environmental conditions depressed coffee production globally, doubling the price of raw beans in just months.
The Impact of Climate Change on Coffee Production
“Unfortunately, coffee is going to become more scarce,” said Colón, founder and roaster at Fuego Coffee Roasters. “Seeing that dramatic loss of the Brazilian crop is a perfect example.” Losses from heat and drought have cut production forecasts in Brazil and Vietnam, the world’s largest coffee growers. Global production is still expected to increase, but not as much as commodity market investors had expected. That’s sent coffee prices up, largely because of continued high demand in Europe, the U.S., and China.
Tariffs and Their Effects on the Coffee Industry
Prices peaked in February but have remained high, forcing roasters like Colón to weigh how much of that cost to absorb and how much to pass on to consumers. President Donald Trump’s current 10% tariffs cover most coffee-producing countries, including Brazil, Ethiopia, and Colombia, and are expected to drive up costs for Americans. Amid his chaotic tariff pronouncements — at one point he threatened 46% tariffs on Vietnam imports and 32% on Indonesia imports before pausing them — American coffee roasters are rethinking their supply chains.
The Search for Alternative Solutions
“With all these changes in coffee maybe we should open our own damn farm,” Colón muses. Rural New York isn’t an option, of course. The world’s best coffee thrives near the equator, where seasons are long, and in high altitudes, where slow growing allows beans to gather flavor. But Puerto Rico, where Colón and her husband have roots, isn’t a serious option, either — labor costs are too high and she worries about the increasing risk of crop-damaging hurricanes.
The Complexity of the Coffee Market
She shrugs off buying coffee from Hawaii and California, which she says is either poor quality, overpriced or both. In February, global coffee green exports were down 14.2% from a year earlier, according to the International Coffee Organization’s market report. The shortage led to the highest price ever for raw coffee in February, breaking the record set in 1977 when severe frost wiped out 70% of Brazil’s coffee plants. Climate isn’t the only thing driving up prices, said Daria Whalen, a buyer for San Francisco-based Ritual Coffee Roasters. Inflation is driving up the cost of labor, fertilizers, and borrowing, she said.
Navigating the Challenges
Some of the recent rise in coffee prices may be from importers buying extra in anticipation of the tariffs. Colón believes prices will go still higher as import taxes begin being paid. And with consumer confidence hitting a 12-year low, Colón could see a decrease in demand for her premium coffee. “It is tough on our end because it drives the price up, tough on the consumer end because they have to pay more and tough on the farmers’ end because they may be experiencing really significant losses,” Colón said. Yet she’s committed to expanding.
Expansion and Cost Management
In December, she and her husband took out a $50,000 loan to buy a custom coffee roaster from Turkey that will triple capacity. They’re trying to increase sales by adding new wholesale clients like coffee shops, and selling directly to homes via a beans-of-the-month-style subscription service. The Colóns have raised the wholesale price on a pound of roasted beans by 25 cents. They’re considering doing the same for pour-overs and espresso drinks at their two retail locations.
Consumer Response
At one of those, called Melo, one couple said they don’t look at the coffee’s price on the receipt. For them, it’s a treat. “We know we could go find coffee cheaper somewhere else,” said Rob Newell, a high school biology teacher, as he held a cooing infant daughter alongside his wife, who is also a teacher. “Maybe it’s just because we’re new parents, but you get, like, cabin fever staying in the house all day.”
Conclusion
The rising cost of coffee due to climate change and tariffs is a complex issue that affects not only coffee roasters but also consumers. As the demand for coffee continues to grow, it is essential to find sustainable solutions to mitigate the effects of climate change and tariffs on the coffee industry. By adopting innovative approaches to coffee production, processing, and distribution, the industry can reduce its environmental impact while ensuring the quality and affordability of coffee for consumers.
FAQs
- What is causing the increase in coffee prices?
- The increase in coffee prices is primarily due to climate change, which has led to severe droughts and heat, affecting coffee production globally. Additionally, tariffs imposed on coffee-producing countries have driven up costs for American coffee roasters.
- How are coffee roasters responding to the price increase?
- Coffee roasters are responding to the price increase by weighing how much of the cost to absorb and how much to pass on to consumers. Some are also exploring alternative supply chains and seeking to cut costs by stacking up more bags of raw beans or cultivating relationships with farmers.
- What is the impact of tariffs on the coffee industry?
- Tariffs on coffee-producing countries are expected to drive up costs for Americans. The uncertainty surrounding tariffs has led to a complex market, with importers buying extra in anticipation of the tariffs, which may further increase prices.
- How are consumers affected by the rising cost of coffee?
- Consumers are affected by the rising cost of coffee as prices increase. However, some consumers view coffee as a treat and are willing to pay more for high-quality coffee. Others may seek cheaper alternatives, which could impact demand for premium coffee.
