Why Coffee Prices Are Rising

The average coffee cup price is up 17% from 2016, at $4.50, according to The Wall Street Journal.

Coffee prices are lower than they should be, in the view of experts who anticipate prices will rise in the next six to nine months.

Why Coffee Prices Are Heading Higher

Two factors are causing coffee prices to rise are, according to industry experts. 

Supply Constraints. A shipping container shortage in Southeast Asia has made it take longer and cost more to export and import coffee.

The shortage has caused freight rates to rise and increased the price of coffee, José Sette, executive director of the International Coffee Organization, or ICO, told the WSJ. 

CNBC spoke with Jorge Cuevas, an executive at Sustainable Harvest Coffee Importers in Portland, Oregon, who said: “It is now more expensive than in the last five to 10 years to bring coffee to the consumer.”

A demand recovery is paralleled by a lack of supply, creating an imbalance between supply and demand.

According to the ICO, world coffee consumption is projected to increase as the global economy recovers.

Yet Marex Spectron estimates that the global coffee market will produce 10.7 million fewer coffee bags in 2021-2022.

The short supply of coffee and higher demand will cause coffee prices to increase.

Extreme weather. In 2020, devastating hurricanes in coffee production places like Nicaragua and Honduras caused damage to infrastructure.

The ICO's Sette told the Journal that weather blocked trade routes and diminished the coffee bean supply to importing countries like the U.S.

Climate change, specifically rising temperatures, will continue to pose risks to coffee production, he said. 

A drought in Brazil is expected to cause an unusually low crop yield for 2021-2022, the coffee expert reportedly said.

What's Next For The Coffee Market?

The effects of the drought are still yet to be seen in local cafes and grocery stores.

“While we regularly evaluate costs to determine appropriate actions, we do not have any imminent planning to share at this time,” J M Smucker Co SJM, owner of the cofeee brands Dunkin and Folgers, told CNBC in a statement. 

The news channel quoted Eric Lauterbach, president and COO at Peet’s, as saying: “We are not worried about supplies, as we have good inventory positions.”