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As a coffee roaster, we are constantly monitoring the price of raw coffee (or green coffee as we roasters call it) from a number of origins. The commodity price, often referred to as the “C” price, for Arabica coffee beans forms the base of coffee pricing for nearly all roasters. All before we roast and sell it to you, the customer. As this price increases, it naturally affects the price through the supply chain to the consumer.
Recently this price has risen to a 2 year high and is projected to continue to increase and remain at these levels throughout next year. The C price in July of 2023 was $1.620 per pound and closed Thursday, July 18, 2024 at $2.409.
The short answer: supply and demand. We have more demand for coffees than we have supplies. While Dilworth Coffee does not utilize Robusta beans in our coffees, many roasters around the world utilize them. The largest producer of these, Vietnam and Brazil, have had much smaller 2023/2024 crops and expect small crops for 2024/2025. Thus, the Robusta supply has dropped and the price has increased. Buyers of these coffees have had to buy lower grade Arabicas to meet their needs. This increased demand for Arabicas and therefore that coffee price as well.
Indonesia, a major supplier of Arabica coffees, has also experienced significant reductions in production due to adverse weather conditions. Brazil, the world's largest Arabica producer, has experienced dryer weather with smaller green coffee sizes, and are expecting lower crop yields in 2024/2025. If you follow agricultural commodity pricing, cocoa, sugar, orange juice, cotton and many more commodities are experiencing production issues.
In checking with our sources in the coffee production side of the industry, no one knows. The sellers of green coffee are hoping for higher prices to help them with the higher costs of production and the buyers are hoping for lower prices to minimize high retail prices. This leads to market imbalances as producers do not tender their crops to market, and buyers are not buying. These factors will only lead to more coffee pricing volatility in the short term.
In reviewing available news reports and anecdotal feedback from producers, it appears that we may be looking at elevated prices for another 12 plus months. The reasons that have led to lower production for this year appear to be persisting for the next growing cycle. Shipping issues, especially with the Red Sea and Suez Canal, have led to increased shipping times of needed crop inputs to production countries and higher costs to move the coffees to the consumption markets. How long this situation will last, no one really knows, and further geopolitical crises will continue to impact coffee pricing.
As in any supply and demand equation, eventually higher prices should help to increase demand as producers increase production and buyers may temper their consumption or demand. However, for us in the business of coffee, we hope demand does not suffer. We hope the producers are able to increase production, maintain and improve quality and receive a fair return on investment for their efforts.
For all of us who are in the business of roasting, distributing, brewing and otherwise drinking coffee, these higher prices mean we will need to pay more for the coffee we buy, and certain origins or quality levels may actually increase more than the overall market. As a roaster, we are looking at future green contracts to help minimize the impact of pricing. We are also looking at how we can change some of our blends to utilize different origins and roast profiles to mitigate the increases, while maintaining quality and taste profiles. Roasters (like us), retailers, coffee shops, and other places selling and serving coffee may actually have to increase prices for this delicious beverage.
Our jobs will be to:
At Dilworth Coffee, we are ready to assist you in learning, adapting, and educating your staff and customers with tactics and strategies to overcome these current challenges in the coffee industry.
Coffee is a beverage known and loved by millions, and especially us here at Dilworth. We want to enable coffee drinkers to get a great cup of coffee, and all the producers and growers making it possible are happy and able to continue to provide it. So cheers to navigating this wild world of coffee together, folks! And we're always around if you want to talk shop.
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