Costly coffee is here

From Seoul to Seattle, the rising price of coffee beans is making its way into consumers’ cups.

Some of the world’s largest roasters and sellers of coffee are increasing menu prices after warning customers last year that prices would rise as beans began to soar. Increased wages and other costs have also contributed to the rising cost of a daily cup, which has exacerbated the global economy’s inflationary pressures.

Futures for arabica coffee increased by 76 percent in 2021, reaching decade highs following droughts and once-in-a-generation frosts that ravaged Brazil’s crops. This year, the most actively traded futures are up more than 5%. Large roasters typically purchase inventory months or even years in advance, implying that another price war may be imminent.

“The next 12 to 18 months will be difficult for consumers, and we anticipate further price increases this year,” said Geordie Wilkes, head of research at London brokerage Sucden Financial. “We do not anticipate a proportionate change in consumption as a result of higher prices; however, we may see a shift away from roast and ground to soluble.”

Due to a fragmented supply chain, where roasters are forced to pay exorbitant rates for shipping containers, some coffee traders have resorted to chartering break-bulk vessels.

“Margins have been squeezed, but various market participants were behind the curve, waiting for a market correction that never materialised,” Wilkes explained.

Starbucks plans to increase menu prices again this year, following increases in October and January, CEO Kevin Johnson said Tuesday during an earnings call.

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