Even before the pandemic hit, many could only face the day with the help of caffeine in a cup or two (or more) of coffee. But perking up this way may be more difficult soon with declining supplies of coffee beans and rising prices for what is available. Trouble is brewing for coffee drinkers.
Don’t think issues with access to coffee would be a big problem in the United States? Well, think again. Seven out of ten Americans drink coffee at least once a week; approximately 64% of Americans consume the beverage daily. Americans drink around 146 billion (that’s billion with a “B”) cups of coffee annually. According to therobusttrader.com, the commodity has provided1.6 million jobs in the U.S. Clearly, American demand for coffee is high.
But unless you’ve got lots of bucks, it may become cost prohibitive to drink coffee at home much less purchase your favorite coffee drink at Starbucks. Why? The cost of coffee beans has risen more than 40% so far this year. Coffee futures DOUBLED in late July to prices not seen since 2014. For years, the price per pound was around $1, but the figure is now closer to $2. That price increase should stimulate your curiosity like caffeine does your body in the morning.
We all get prices going up, but what’s a coffee future? For those of us who are not commodities traders (raising my hand since, yes, I did have to look up the term), a coffee future is a standardized contract to buy or sell a specific quantity of an item at a presently agreed price for delivery at a specified future date. If prices are skyrocketing for such contracts for coffee, the intel must be solid that costs are going nowhere but up.
So what’s causing the cost of coffee beans to rise higher than the weight you gain imbibing a few calorie-laden Starbucks’ offerings? As is often the case, more than one factor can be blamed. Let’s start with the weather. Brazil, the world’s largest coffee producer, has experienced a sustained drought followed by two July frosts decreasing its coffee output. The Brazilian crop loss is estimated at between 2 million and 6 million bags of coffee, about 12% of its usual output. The frosts will significantly affect the 2022-2023 harvest because the damaged crops are about a year out from harvest.
But Brazil is just one of over 70 countries which grows coffee. The world’s coffee belt circles the globe along the equator with cultivation occurring in North America, Central America, South America, Africa, Asia, the Middle East, and the Caribbean. Can’t the other countries make up the harvest deficit? Unfortunately, they are also experiencing production problems due to climate change. Apparently, the coffee belt is tightening.
Climate change has contributed to coffee growing difficulties because of climate variability, extreme weather events, and drought. Changing temperatures and rainfall could reduce the size of coffee-growing areas. All these factors decrease yields causing supply problems. But the problem extends far beyond simply not enough beans for the coffee grinder. Recent studies show up to 60% of high-quality coffee species are at risk of extinction because of the adverse effect of climate change.
Even the coffee which is produced is negatively impacted. Higher temperatures can lead to accelerated fruit development and ripening which degrades the quality of the coffee beans. That’s a bitter pill and a bitter cup of joe to have to swallow. A warmer climate also is more conducive to pest problems. A 2011 study showed the dread hypothenemus hampei, more commonly known as the coffee berry borer, tends to thrive in warmer conditions. But wait! There’s more! Additionally, coffee is vulnerable to fungal infections called rust. Rising temperatures and extreme rainfall are blamed for a severe rust outbreak in Central America. Yuk! Keep bugs and rust away from the beans used in my coffee.
And it’s not just coffee consumers taking a blow from production problems. Coffee is important to the economies of many tropical countries. Inability to produce as much of or as good of a coffee crop as in the past will be devastating financially.
Climate change, though, is not the only cause of rising coffee prices. While half the cost of a bag of coffee is the beans themselves, production and transportation expenses play a part in the remaining cost. With supply chain issues, labor shortages, and lack of shipping containers, is it any wonder that the cost of buying beans for our breakfast beverage is bigger?
An interesting development from these coffee problems is a new growing area. While coffee is traditionally grown in tropical, humid climates, climate change has resulted in the trend for California farmers, with a Mediterranean climate, to try growing coffee. California’s drier climate makes it immune from the destructive coffee rust fungus. The state’s location further from the equator means it takes the beans longer to ripen leading to a more defined tasted.
How did farmers in the Golden State, known more for crops like almonds and avocados, decide to grow coffee? A University of California Cooperative Extension advisor looking for a crop to replace the declining production of aging avocado trees came up with the idea. And what a good idea it was. Coffee grows well in the shade of avocado trees. To date more than 100,000 coffee trees have been planted on over 70 farms in the state, mostly specialty Arabica varieties. FRINJ, a business focused on coffee production there, has as its goal to make Southern California the next specialty coffee capital of the world.
Whether coffee growers in California, an industry still in the early stages of development, will be successful remains to be seen. Climate change has negatively effected that state too as it is currently dealing with water scarcity. Due to reduced rainfall, coffee growers must rely on irrigation, and coffee is a water intensive crop, requiring almost double what it takes to grow almonds. Let’s not even get into the need for consumers to have water to make their coffee to drink.
World issues such as climate change, supply chain problems, and labor shortages, are combining to threaten the simple pleasure of enjoying a cup of coffee. Coffee prices are going up and the taste is going down. Growing areas are declining and shifting. Hopefully, California farmers will soon be able to say, “Our bottom line is in the black, so we can provide you with a cup of black coffee to drink as you please.” I’ll take mine reasonably-priced, tasty, and enhanced with half and half and sweetener. A shot of salted caramel syrup would be nice too.
Do you drink coffee? Have you noticed a rise in coffee prices? How high would prices have to go before you’d reduce your coffee-drinking?