What are your price preferences for a cup of coffee?
Cafe owners are passing on rising coffee costs to customers. Input costs are increasing as a result of high gasoline prices and dwindling bean supplies.
Staff shortages exacerbate the pressures already exerted on businesses. An economist warns that the pressures will continue to build until the RBA’s upcoming rate hike takes effect.
That is the question consumers must consider as the price of virtually everything has increased, from green coffee beans to milk, containers, and gasoline.
In some cafes, a shot of caffeine now costs between 30 and 50 cents more.
Coffee roasters and cafe owners in central-western New South Wales say they have been absorbing these price increases for several months and it is now time to pass them on to the consumer.
The Coffee C contract, which serves as the global benchmark for arabica coffee, has effectively doubled in price, from around $1.24 USD per pound in early 2021 to around $2.40 USD per pound today.
Coffee bean prices have nearly doubled in the last year. Academy, based in Orange, sources its beans from Southern and Central America and recently increased its price per cup by 50 cents.
According to owner Matt Swiatkiwsky, one of the worst frosts in half a century struck Brazil in the middle of last year, causing a global shortage and driving up the price of beans.
“Price declines are unlikely to occur for another two years,” Mr Swiatkiwsky said.
He estimated that it would take another three years for plants to recover and grow.
Businesses scrape by Mr Swiatkiwsky said the price of a pallet of coffee had nearly doubled in the last two years, from about $7,000 to $13,000.
“With the cost of fuel increasing, freight would be a big one for us,” he explained.
Mr Swiatkiwsky does not anticipate a decrease in the price of coffee anytime soon, if ever, because some businesses are “eking out an existence.”
“In all candour, I believe that a good portion of these prices should have been passed on long ago,” he said.
With farmers along the equator confronted by harsh climatic conditions and low wages, he warned that the industry was in peril.
“If you don’t pay a fair price for coffee, there will be no market for it in the future.”
The hospitality industry is in trouble.
Worker shortages have added to the region’s business pressures.
The unemployment rate is on track to reach levels not seen since the 1970s, below 4%.
“There are more people working now than there were 40 years ago; people have simply shifted away from hospitality,” Mr Swiatkiwsky explained.
Michael Everett prepares coffee in an Orange coffee shop.
Michael Everett opened his cafe 18 months ago and had no idea it would remain difficult in 2022.
(Xanthe Gregory, ABC Central West)
Michael Everett, who owns three cafes in Orange, said that the cost of doing business had increased in lockstep with the cost of living.
“Every single component of a cup except sugar has increased significantly in price in the last couple of months,” Mr Everett said.
“Unfortunately, no, I don’t see it coming to an end anytime soon,” he explained.