Buying coffee in bulk like we do, we are always searching for the best tasting coffees. But, we also have to be cognizant of coffee price trends. Buying a week or two too soon or too late in a volatile market can impact whether we make much of a profit or not. So I have started watching the coffee futures market a bit, especially when it’s close to time to place another large order for green beans. I can’t say that I am an expert, or really know much at all about predicting trends, but I have found several resources that seem to have a pretty good basis in the factors that can affect the prices of coffee. These factors include supply and demand, weather forecasts that could impact the growth of the coffee plants or the ability to harvest at the peak times, trade tariffs, and political stability.
Since most of the coffees we buy are grown by small farmers at higher altitudes, they are mostly farmed by hand and the weather can greatly affect the ability to traverse these steep mountain farms and efficiently harvest the fruits. Even though a lot of specialty coffee comes from these smaller farms, they actually represent a very small portion of the coffee produced and therefore their fortunes don’t really have much impact on coffee prices in general which can make it very hard for these small producers to make money as well.
The country of Brazil is the largest coffee exporter in the world and therefore their fortunes tend to lead the coffee market. If they have a good harvest and supply is high, the price for coffee will generally decrease even though the cost to produce on the smaller farms has not gone down which makes it doubly tough on these small farmers. Also, much of the coffee in Brazil is produced on big mechanized farms that can take advantage of economies of scale to keep their costs low and their profits higher.
Trading in coffee is big business but also of interest to smaller companies like ours. We try to support the smaller farms when possible, but some of our best coffees are from Brazil and Colombia (the second largest coffee exporter). The link below is to a short but interesting article that makes the complex subject of trading coffee futures a bit simpler to understand and also contains a few interesting links to other resources if you want to dig a bit deeper.
https://www.thebalance.com/trading-coffee-futures-809346
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Two years have gone by since my original post when when Coffee futures sold for about $.95 per pound. A year later in October of 2020, prices had increased about 20% or so to about $1.15 per pound. Now, a bit more than a year later, December 2021, and coffee futures are at almost $2.50 per pound. That is more than double in just over a year. Shipping issues, the pandemic, bad weather in the growing regions of Brazil, have combined to push coffee prices to their highest levels in a decade or more! Talk about inflation! And you think Starbucks is expensive already!
Coffee prices have gone gone through the roof lately.
The NY ‘C’ market is up approximately 25 cents/lb within the past two days, with September futures trading at $1.76/lb this morning. This gain is due to critical weather concerns in the top producing coffee country, Brazil. Temperatures in several of Brazil’s coffee-growing regions fell below 0 degrees Celsius, resulting in severe crop damage caused by frost. Brazil has already dealt with dry weather conditions within the last year, so more weather issues can significantly reduce the 22/23 arabica crop. That combined with increasing demand and coffee supplies already low are causing the dramatic increases. With margins low in the coffee industry, consumers will begin to feel the increase very soon!
Coffee prices have gone on a series of cycles of ups and downs this year.
December 2019 $1.36
February 2020 $.97
March 2020 $1.30
June 2020 $.94
September 4, 2020 $1.35
September 30, 2020 $1.10
The high and low points are short-lived and for the most part coffee has traded in the $1.00 – $1.15 range this year, which is a bit higher than 2019, but lower than 2016, 2017 and 2018.
A week later and prices continue to fall – currently down to $1.05 per pound.
Coffee prices went on a tear shortly after this post rising to almost $1.40 per lb. Almost a 50% increase in prices. It has since cooled a bit down to about $1.12 per lb., but that is still a 15% increase in just a few months.