Coffee Prices Surge as Climate Change Hits Production: A Luxury in the Making

In the picturesque highlands of Chiapas, Mexico, around 150 coffee farmers on the Edelmann family farm labor under the shade of tree canopies, battling extreme weather conditions exacerbated by climate change. Despite their efforts, this year’s harvest has been compromised by an extended dry season, leading to lower yields and rising production costs.

Tomas Edelmann, a fourth-generation coffee farmer and vice president of the Coffee Farmer’s Co-op, explained to CNN that the adverse weather conditions have significantly impacted their output. “Without the right weather, production suffers, and with lower yields, the cost of production inevitably increases,” he said.

This escalation in production costs is expected to drive up coffee prices, potentially making the beloved beverage a luxury item. The International Coffee Organization (ICO) reported that the ICO Composite Indicator Price, a crucial benchmark for the coffee industry, recently reached a 13-year high at approximately $2.27 per pound.

Ryan Delany, founder and chief analyst at Coffee Trading Academy, attributed the price surge to complex supply and demand dynamics. “Coffee is influenced by numerous factors, including climate change, which is significantly affecting global supply,” he noted.

The impact of climate change on coffee production is profound. Michael Hoffmann, professor emeritus at Cornell University, highlighted the crop’s sensitivity to temperature changes and severe weather events. “The worsening climate is likely to increase coffee prices as production becomes more challenging,” Hoffmann said.

Brazil, the world’s leading producer of Arabica coffee, experienced a severe frost in the summer of 2021, leading to a spike in coffee futures. The frost’s effects extended to Robusta coffee as well, driving up prices across the board. Robusta, though more resilient than Arabica, has also suffered from droughts and high temperatures. The US Department of Agriculture reported a 7% drop in Robusta exports from Vietnam, its top producer, due to adverse weather conditions.

Neil Rosser, a coffee commodity consultant, noted that rising Robusta costs are now contributing to the overall increase in coffee prices. “Climate change is creating instability in the market, which is unlikely to resolve quickly,” he said.

Retailers are already feeling the impact. Lavazza, an Italian coffee maker, cited a combination of poor harvests, climate change, geopolitical conflicts, and other factors as reasons for raising prices. The company expects supermarket coffee prices in the UK to increase by an additional 10%.

Nestlé, the owner of Nescafé, reported a decrease in profit margins due to higher Robusta costs and a shift in consumer behavior as budget-conscious buyers pull back.

Starbucks, however, may not immediately reflect these price increases in its products. The company uses fixed-price contracts and hedging strategies to stabilize costs. According to Sharon Zackfia, head of consumer equity research at William Blair, Starbucks can weather short-term price spikes due to its long-term contracts and coffee inventory.

Despite these challenges, coffee remains an essential part of daily life for many. “Coffee is a staple for many people, and despite price increases, consumption patterns are unlikely to change significantly,” Delany said. As the coffee industry navigates these turbulent times, consumers may face higher prices for their daily cup of joe.