Why Coffee Prices are flying high
Ooff. In the past few months, a real thunderstorm has blown across the coffee business. Shook up the market. And made prices skyrocket.
Green coffee prices have jumped about 70 percent in the past year. Of course, we’ve faced similar scenarios and statistics in the past. But this time, it hits different, says miró co-founder Dani Sanchez: «What we’ve seen in the last 12 months is unprecedented. Since our opening in 2013, we have never faced a situation quite like this. This will be the first-ever price increase on roasted coffee in miró’s history due to market volatility.»
«The biggest challenge right now is securing high-quality green coffee at sustainable prices.»
Dani Sanchez, miró co-founder
Main factor: climate change
The primary driver of today’s challenging situation for specialty coffee – and coffee in general – according to our co-founder Dani Sanchez is climate change. Coffee plants need distinct wet and dry seasons, but the climate crisis is disrupting weather patterns, making key coffee-growing regions (like Brazil, Ethiopia and Colombia) struggle with lower yields.
During last autumn, the main coffee export country Brazil experienced extremely hot and dry weather conditions causing draughts, frosts and excessive rainfall due to climate change. This led to poor-quality crops and much lower yields than usually expected. That in turn turned the forecast for the running year upside down – which made the price calculations in the market rise skywards. Fabricio Andrade, CEO of our long-time partners Sancoffee, an independent cooperative of specialty coffee producers from the Campo das Vertentes region of Brazil where our Boa Vista beans are from, adds: «The consistent underproduction has also created a supply deficit, further driving up prices.»
Tania Humphrey, director of research and development at World Coffee Research
Supply is down, demand is up
In addition to climate change, geopolitical instability, higher production costs, increasing regulations and shifting market dynamics add complexity to sourcing and pricing strategies, says Dani. «For example the EUDR (European Union Deforestation Regulation) has caused a spike in demand, as large coffee buyers rushed to secure supply before the regulation came into effect. Lastly, speculative trading and financial market influences have further driven prices up.»
To top it up, coffee prices have already been augmenting for years now – and even more sharply in the past few months. According to Jean Etchats, coffee sourcing director of Belco, coffee’s a product that has been underestimated and underprized for the past fifty years. There’s been a rising demand and higher consumption (caused by population growth & middle-class booms) compared to a stagnating production of coffee (due to climate change & social factors like labor scarcity, aging producers and lack of succession) for quite some time. In addition to that, the ongoing imbalance between production costs and retail prices marks another reason why we’re now facing an immediate rise in coffee prices today.
«All these factors, when combined, have created a perfect storm, leading to historically high green coffee prices.»
Fabricio Andrade, CEO Sancoffee
Still: As complex as the matter is, climate change remains the number one factor on the increase and change in prices in the coffee market, also according to Jackie Newman, vice president of world of coffee. This, in turn puts a lot of stress on the market faced with the fact that the coffee supply is down, whilst the demand is up.
«This trend shows no signs of slowing, as unpredictable extreme weather patterns and economic pressures continue to affect global coffee production.»
Dani Sanchez, miró co-founder
What does this mean for miró and you?
This news leaves us coffee lovers with a bitter taste. Kind of. But – besides the many threats that we’re faced with in the field of coffee, the current situation also holds new opportunities such as increasing producer revenues, attracting younger generations back to farming, premiumization of coffee quality or the expansion of the specialty coffee market in Europe.
Also: miró’s adaption approach and sourcing philosophy stays the same, no matter what. «At miró we closely monitor the situation daily. Our commitment to quality remains unchanged, and we continue to work with the same trusted suppliers we’ve partnered with for years», Dani is assuring. While some coffees were secured before the price surge, adjustments will still be necessary for others: «Expect around a 10 percent price increase, particularly affecting coffees from Peru, Brazil, Ethiopia, and Honduras.»
«We appreciate our customers’ understanding and continued support during this challenging period.»
Dani Sanchez, miró co-founder
One thing’s sure though: You’ll still get the best coffee out there – just at a slightly higher price. According to Dani we remain committed to transparency, quality and sustainability at all times. Therefore, we ensure that price increases reflect real market changes rather than profit-driven decisions.
… and what about the future?
In Switzerland, we are somewhat fortunate, as the strong Swiss Franc helps mitigate some of the cost increases when purchasing green coffee. Roasters in other countries, dealing with weaker currencies, will likely face even steeper price adjustments, says Dani. And: «I hope the situation stabilizes over the course of the year, but further price corrections across the coffee sector seem inevitable.»
