I noticed this chart in the FT this morning:
They highlight the increase in the price of coffee in the US, saying:
For the US, whose roasters rely on imports for almost all of their supply, costs have increased further since US President Donald Trump declared a 50 per cent tariff on Brazil in July. Brazil is the world's biggest producer of higher-end arabica coffee and historically supplied about a third of the beans consumed in the US.
They added:
Coffee shipments from Brazil into the US have halved in the year to date, according to Vizion, a shipping data service. The decline accelerated in August, when the coffee exports from Brazil were down more than 75 per cent from August 2024.
There can be no doubt, then, that part of this price increase is down to the fact that Trump is imposing tariffs, and particularly penal tariffs in this case, on Brazil.
But, for someone like me, who takes some interest in coffee, because I drink quite a lot of it, and because it has long been emblematic of many of the stresses within economic development, it is important to note that this is not the only reason for increasing world coffee prices. The price rise as seen in the USA might be exceptional, and have a particular cause, but there is an underlying issue in the price of coffee, which is, in itself, worth noting because of what it says about the way in which the world is developing.
I am, of course, not alone in liking coffee. Coffee is one of the world's most traded commodities. Despite this, in recent years, global coffee supply chains have increased in vulnerability in the face of climate change, financial speculation and the wider crises of neoliberal globalisation.
Brazil and Vietnam are the two largest coffee producers, and both have been hit by droughts, frosts and irregular rainfall in recent years. Like so much of the change in our weather, these extremes are no longer one-off events. They are the seemingly predictable consequences of climate change, and they are undermining the stability of coffee harvests. This is exacerbated because coffee can only be grown in narrow climatic zones, and as a result, it is very sensitive to such shocks. A bad season in these countries creates price reverberations in every café I visit.
On top of that, reports that I have been reading of late (precisely because I do find this market of interest) suggest that the costs of coffee production have been rising. Farmers have been facing rising bills for fertilisers, energy, labour and transport. Even when harvests are good, these higher input costs drive up prices. Increased shipping costs since the pandemic have also played a part here.
At the same time, more people are drinking coffee. They have discovered just what I like about the stuff. Consumption is growing, not only in traditional markets but also, apparently, in Asia and Africa, where urbanisation and higher incomes are creating new consumers. Coffee might be suffering from a problem as a form of conspicuous consumption. A shift in taste towards speciality coffee beans is exacerbating this trend. The result is simple: more buyers are chasing supplies that are increasingly uncertain.
So now, let's bring on the villains in the piece. Coffee is traded on global futures markets. That means that expectations of future shortages, or even rumours of poor weather, can drive up prices long before beans are harvested. In theory, this trading provides stability by letting producers hedge their risks. In practice, it often amplifies volatility as traders pile in and out of the market. As is always the case, the volumes of coffee traded are much higher than the actual volumes produced: speculative gains and the extraction of resulting rents are a major factor in the increase in the world coffee price.
And then, there are tariffs.
The result is that the price of coffee is being pushed upwards from every direction: supply is less reliable, production is more costly, demand is rising, and speculation is adding instability.
Coffee, then, is not just a drink. It provides a lens through which we can view the pressures shaping the global economy. Climate change, fragile supply chains, financialisation and inequality are all there in the cup of coffee we might enjoy today. And if we want to secure a sustainable future for farming communities worldwide, we need to recognise that coffee's price is a symptom of a much deeper malaise in how our economic system is organised.
The question is, is anyone willing to do anything about creating stability where it is needed for all those who are dependent upon coffee, most particularly for their incomes, throughout the world?
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Buy me a coffee!
I was musing over this only this morning – I buy coffee for home in bulk and I’m seeing costs rises every time I buy to the point where I might as well just buy it from the supermarket for all the difference it gives me. This started with BREXIT – proof to me if any was needed about how harmful that escapade was!!
Could I live without coffee or less coffee? Well, I suppose it will have to be considered. Maybe coffee will be like a lot of things going forward in that it will become only for a certain segment of the population who can afford it? Well, good coffee anyway (I like to grind my own which I have always found to be cheaper).
some years ago you used a cup of coffee as a metaphor for the economy.
I did
The cappuccino economy
Although I loathe cappuccino and milk in just about anything
What explains this:
https://ourworldindata.org/grapher/coffee-production-by-region
Production over the last 5 years is an all time high.
Deamnd, as I said.
Production can rise but if demand goes up more the price still increases.
Commodity futures are useful, evidence from clay tablets suggest they have been around for 4,000 years.
But the rise of hedge funds and, more importantly, their size causes problems in the market. For example, total annual coffee production is worth $25bn whereas Bridgewater (just one of many funds) has assets on $100bn. So, if they want a “meaningful” position (to their overall risk) they swamp the market and drive prices a long way.
Coffee is just not that liquid (boom-boom).
Having said that, agricultural prices have always been volatile. Indeed, modern technology (transport, storage, information) has worked to reduce farm gate price volatility…. only to be replaced by speculator driven volatility.
Thanks, and agreed
China is now in the market for Brazilian coffee, as Brazil sought new trade partner after Trumps tariffs.
Kevin explains in detail why the tariffs might make this a permanent US loss.
https://youtu.be/-19cPqrjdl4?si=wrDAq8nYUS1l9oi0
You’re absolutely correct about the impact of increasing coffee prices in the US. It gets mentioned on MSNBC and other current affairs/news more than any other commodity as far as I can make out from what I watch. And not surprising, as they consume so much.
Another to watch is soya beans. US farmers typically ship one third of their crop to China. There was a news report just the other day, noting the comments of a farmers leader in some part of the US (the voted solidly for Trump) where he noted – with great concern – that China has order NO US soya beans.
Interestingly, the same things happened in Trump’s first term, when the federal government ended up having to pay billions in subsidies to make up for the lost exports. An unhinged President and government is putting it mildly.
You can’t beat a good cup of tea.
I agree – after about 4pm
Providing it’s Pukka herbal tea.
I drink organic coffee from Cafe Direct, from Peru.
It’s more expensive anyway, but will it go up at the same rate, as there are no rising bills for fertilisers?
On tea, I am in the builder’s tea categpory, drunk black
………..especially if its Barries Red label – from Ireland. Tasty stuff.
And I must learn to leave milk out of my coffee.
The west is fixated on cheap food. Rather than paying a fair price to producers, the supply chain and final retail increases the price every step of the way. Even Fairtrade products in the UK attract a premium.
All modern futures markets are in my view utterly unnecessary. They are speculation markets.
But the original producers do not benefit.
Just a thought but is King Donald targeting Brazil not just about coffee but also soybean production?
From todays New York Times International Edition ” Brazil is the only other country with enough soybeans to meet Chinese demands with enough trains and port capacity t o move those soybeans to China”.
A lot of this is due to climate change, something non of our governments really take seriously and the COP process in helping the poorer more vulnerable countries has largely failed. Coffee and tea (which I much prefer) are essentially luxury products which we can only afford as a result of our empire. If you read the Ethical Consumer reports it’s hard to have affordable tea and coffee without basically exploiting ex colonial countries. Having said that I don’t want to think of a world without tea!
Good points. If we’re looking for a bright side to this, climate change means coffee is now viable as a crop in the hottest margins of Europe, southern Sicily for example and indeed who makes better coffee than the Italians anyway? They invented the espresso, God’s gift to the coffee connoisseur.
On the topic of commodities as a lens on other things I recommend Ha-Joon Chang’s “Edible Economics”; He writes very well and takes sharp aim at the perils of neloliberalism through the medium of acorns, limes, okra, etc, etc.
Sorry – but that is so naive it is absurd
It was a joke, Richard. Maybe you should try decaff from time to time.
Sacrilege!
I drink decaf most of the time, which is fortunate.
I have just discovered that you shouldn’t drink coffee within 4 hours of taking thyroxine, and I’ve been taking that for over 40 years.
Can’t imagine not being able to drink coffee until after lunch.
There are alternatives………….
https://www.youtube.com/watch?v=ZfOanv9oUv4
He’s very good BTW middle son watches him a lot
Domestic Facilities management is suffering Chocolate Withdrawal Symptoms as it heads back towards the Luxury category so it isnt just Coffee
I will watch that
If Donald Trump wants tariffs to result in ‘reshoring’ of production to US-based companies and jobs, then perhaps he should promote sweet-potato coffee as the patriotic way?
That, or roasted acorns coffee…
🙂
My husband and I once made coffee from dandelion roots.
It took a long time and we decided it wasn’t worth the effort. Once was the operable word.
🙂
Dandelion roots? How tame! Civet coffee or go home!
Just to be clear, this isn’t an endorsement 🙂
Being a tame sort of person myself, the current price insanity has me investigating buying green beans and roasting them. I’m not convinced it will save money (or time, the most precious commodity), but it looks interesting, and the results might be fresher. The process appears to have nasty byproducts though! I didn’t realize roasting coffee produced so much fumes. I wonder if anyone has studied the environmental impact…
I have read about it. James Hoffmann, who knows a thing or two about coffee, says don’t do it.
Lynne, are you suggesting animal exploitation to someone who is as vegan as you can get without being 100%?
It must be the most expensive type of coffee, too.
My local roaster was complaining that prices are now very volatile shifting significantly in a day
I suspect that commodity traders may well be the cause
[…] Cross-posted from Richard Murphy’s blog […]
https://baocaphe.org/farm-gate-coffee-prices-in-the-global-market-are-rising/
Coffee bean prices are soaring in the four major producing countries
I heard a snippet on Radio 4 recently which suggested that the two varieties of coffee we drink, arabica and robust were chosen almost at random from over a hundred varieties which were known in the nineteenth century. Researchers have re developed a couple of these older varieties which promise to be as tasty and potentially easier to grow. I don’t think any are commercially available but maybe there is some hope in that direction.
Coffee is a fruit. There are are about 100 varieties, some facing extinction, I gather.