2024-09-02 03:04:48
The ritual of drinking coffee, a sacred moment for millions of people around the world, is becoming an increasingly expensive pleasure. In recent years, the price of coffee has risen significantly, causing concern among both consumers and companies in the sector. The fear is that this upward trend will continue in the coming months, even years. Various factors are at the basis of such a scenario: from the climate crisis, which threatens the crops, through the instability of the raw materials market, to the geopolitical tension, which creates difficulties along the supply chains, BTA reported.
Because the price of coffee keeps going up?
The coffee market is going through a period of great upheaval, with the price of green coffee (which is not heat-treated, that is, its beans are not roasted) reaching historic levels.
Just three years ago, a pound (0.454 kg.) of green coffee cost about $1, and today it exceeds $2.45, marking a 66 percent increase over last year.
The price of Arabica coffee per kilogram is forecast to rise to $4.35 in 2025, up from $2.35 in 2018. Robusta will rise to $2.8 per kilogram in 2025, up from $1.87 dollars in 2018.
This increase is due to a number of factors with a detrimental impact on the production and distribution of coffee, writes the Italian edition “Money”.
Climate changes
Climate change is certainly among the main causes. Heavy rains in Brazil and drought in Vietnam caused production to drop sharply, causing reduced supply and increased costs. Cristina Scoccia, CEO of IllyCaffè, has recently highlighted how extreme climate events could lead to a 50 percent reduction in arable coffee-growing areas by 2050. This dramatic scenario is already visible in the short term and has an immediate effect on prices.
Logistics
In addition to the climate, the coffee production and distribution sector is pressured by logistical problems and market speculation. Congestion at ports, and especially at the Suez Canal, slowed supplies, increased costs, and lengthened delivery times. Commodities such as coffee are particularly susceptible to price volatility and are affected by changes in markets. All these elements contribute to maintaining the trend of constant price increases, which has a direct impact on consumers.
Not surprisingly, Giuseppe Lavazza, president of the company of the same name, said: “We have never seen anything like this in our industry”, warning that this pressure on prices could continue until 2025. Meanwhile, consumers in Italy are seeing the price of a cup of coffee they drink per foot of the bar, has risen by 15 percent in the past three years and there are fears it could soon reach €2
How far will prices go?
According to industry analysts, coffee prices may remain volatile and generally high until at least the end of 2024.
Forecasts are influenced by a combination of factors, including trends in climate conditions, geopolitical stability and changing environmental regulations. Many experts believe that climate change will continue to pose a significant threat to coffee production, especially if extreme weather events such as El Niño become more frequent. This could further reduce production in key countries such as Brazil and Vietnam and thus keep prices high.
Another element that could push prices even higher is financial market dynamics. With a growing speculative element in coffee futures fueled by fears of further supply declines, prices could rise rapidly in the near term. For example, in July 2024 Robusta bean futures in London hit an all-time high of well over $4,000 a tonne, a level that would have been unthinkable just a few years ago.
Long-term forecasts do not inspire optimism either. Some analysts suggest that prices may stabilize only when climatic and geopolitical conditions become favorable again, which could take several years. If global production fails to meet rising demand, prices could rise even further to unprecedented levels.
The International Coffee Organization (ICO) indicated that coffee consumption continued to grow globally, with average prices jumping 48.9 percent in July 2024 compared to the previous year. These data point to a tension in the supply-demand gap that may continue to widen, supporting further price increases.
While coffee consumption remains high, the era of stable prices appears to be coming to an end. The forecast for the future indicates that consumers will have to prepare to pay more for a cup of coffee and that prices may not return to their previous levels for an extended period. The coffee market is undergoing a transformation that reflects the global challenges of climate change, geopolitical instability, and only a coordinated response from governments and the private sector can prevent these increases from becoming the “new normal.”