Why the Cost of Coffee Beans Is Climbing

The cost of coffee beans has reached their highest level since the 1970s, with the National Coffee Association stating that more Americans drink coffee than any other beverage. The coffee benchmark “robusta” has not been this high in 45 years due to weak crop production and climate change. Robusta is the basis for espresso and instant coffee, with Vietnam and Brazil being its top growers. As a result, roasters have been bidding up the price.

The shortage comes as coffee consumption is growing worldwide, with not just North American consumers but also European consumers. The possible severing of Israeli-Palestinian banking ties stirs worries, as farming is not easy and poses a lot of risk. Home prices have reached new records, yet consumer confidence rose.

China, where major coffee retailers have expanded, has seen a supply squeeze amid growing demand pushing the price of beans 20% higher so far this year. However, this is not going to show up at the store level right away, as companies buying in big volume lock in purchase prices ahead of time, securing significant amounts of coffee 12 to 18 months in advance.

Even when higher costs are passed on to the consumer, it makes up only a small fraction of what local coffee shops charge. A large part of the $7.20 cost goes to processors, wholesalers, retailers, and transporting those beans, making it tempting to switch to tea.

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