Plenty of us swear by our daily caffeine fix. Coffee tastes good, gives us a nice little buzz, has a handful of health benefits, and doesn't cost all that much.

The price, however, is becoming more of an issue lately. That's because the price of coffee on global markets reached a record high in late 2024 due primarily to unfavorable weather, particularly in Brazil and Vietnam, two of the world's largest producers.

The Coffee Supply Chain

Most coffee beans travel a long road from their place of origin to your local supermarket or coffee shop. The production phase is time-consuming and labor-intensive. It can take three to four years for a newly planted coffee tree just t♉o produce the seed that will eventually become a roasted 🍌coffee bean.

Coffee plants require demanding care and grow best in certain climates, particularly mountainous regions with warm, humid weather. The crops are usually picked by hand, partly because most of them are located in places where it is difficult to transport and use the machinery needed to do it mechanically. Then the cherries, as they are called at that stage, are processed and dried before being packed into 60-kilogram (132-pound) bags for export. At that point, the cherries have become greenish beans.

The U.S. ranks as the single biggest destination of those exports by country, importing some 23.6 million bags of coffee beans in 2023-2024, though the EU as a whole consumes more coffee.

Once the coffee reaches its primary destination, the beans need to be roasted. Roasters resell their product to the companies that distribute it, which could mean big buyers such as Smucker's (SJM), which owns the Folgers brand, or wholesalers who sell to smaller, boutique coffee chains or individual shops.

Of course, the price of a bean goes up at each stage of the supply chain, as everyone from the growers, shippers, roasters, distributors and retailers gets a cut for their role in processing the coffee or moving it on down the line to consumers.

Importers and shippers play an important role in the supply chain. Their job, among other things, is to export the coffee from the farm to the country where it's going and, above all, to make sure the roasters receive the product they pay for. Paying these middlemen rather than buying directly from growers is often necessary, because the risk of getting duped and ripped off is high, says Dan Cox, owner and president of Coffee Enterprises, a consulting firm.

The 澳洲幸运5官方开奖结果体彩网:price of coffee can be volatile, so most roasters te𝔉nd to lock in prices over short time frames. Cox noted that roasters will sometimes buy coffee at a certain price for several months at a time, but won't commit to a price for too long in case the price dro🌃ps.

Prices can, of course, also rise. If that happens and the roaster is unhedged, their margins can tighten. If possible, they will avoid that by selling at a higher price, in which case any extra costs will eventually get passed on to us at our local coffee shop.

A Price Breakdown

Naturally,🌄 many costs go into the price for coffee at the groce🌼ry or local café. While a pound of Equal Exchange roasted bean coffee might fetch anywhere from $10 to $17 on Amazon, for example, the profit margin for Equal Exchange and other brands ranges anywhere from 5% to 15%, according to Spencer Turer, vice president of Coffee Enterprises, a consulting firm.

That's because many input costs have already gone into the coffee by the time a retailer puts a bag of beans up for sale. The first expense is acquiring the raw, still-green coffee—a cost that itself can be "highly variable," Turer says, depending on factors such as the quality, logistics, economies of scale, terms of payment, and so on.

At the next stage, the processing and roasting can shave 15%-20% off the coffee's weight. There are also operating costs. "Roasting and packaging the coffee can cost about $1-$2 per pound while company operations including sales, general, and administrative may be as much as $2-$3 per pound," Turer says. 

There are additional costs for café owners, including paying for the cup, lid, cup carriers, stir sticks, employee wages, etc. According to Turer, the net profit for cafés, which generally charge consumers more per pound, is only slightly better than retailers, ranging from 5% to 20%.

Supply and Demand

Coffee prices depend almost entirely on supply rather than demand. Demand tends to be relatively inelastic and increases in a linear fashion. Supply, meanwhile, is constrained and susceptible to various risks.

Weather

Weather is a huge factor in the price of coffee. Coffee trees are extremely sensitive, can only grow in certain places, and won't produce coffee cherries in abnormal weather conditions. They need the right amount of rainfall and sunlight.

In fact, poor weather in Brazil and Vietnam drove the price of coffee on global commodities markets up by mo🐓re than 80% in 2024, to its highest-ever price. The previous record, set in April 1977, was blamed on snow in Brazil.

In 2024, in Brazil, the world's largest coffee producer, a prolonged drought and heatwave that were followed by heavy rains raised concerns about failure of the 2025 crop. In Vietnam, the second-biggest producer, a severe drought was also followed by excessive rain.

Regulation

Governments in some countries are cracking down on any behavior that contributes to climate 𝐆change. In theory, that should be good for coffee prices as climate change appears to be responsible for the abnormal weather patterns that are reducing supply. However, in reality, this action can put 🦄more pressure on supply and contribute to higher prices.

Another driver of the 2024 price spike has been the EU Deforestation Directive, which plans to outlaw the sale of coffee produced on recently deforested land. This legislation has yet to be implemented but it is causing concern, with analysts claiming that it will make purchasing coffee from many farms too difficult, thus resulting in a sharp reduction in supply, at least initially.

Coffee Futures Market Price vs. Actual Price Pai💮d

The price on the coffee futures market is not always closely related to what the roasters pay or what the sale price is at the farm. The reason is that the futures price is a bet on the future supply of coffee, and thus a bet on the price that a grower can demand. For example, the 2024 price spike has been driven largely by concerns about the 2025 crops in Brazil and Vietnam, not any actual supply disruption that has already taꦇken place.

The prices consumers pay tend to lag the futures market, meaning that even though coffee as a commodity is a very volatile tradin𝕴g item, the price at the store or coffee shop stays relat🉐ively stable.

Is Coffee In a Price Bubble?

If warnings about abnormal weather patterns resulting from climate change prove true, the supply of coffee will likely take more hits in the future. That, on top of anti-deforestation regulation, suggests coffee prices may continue to rise or at least remain elevated above long-term averages. Even in a best-case scenario, the price surge seen in 2024 will likely take years to unwind, analysts say.

Supply is finite, owing to the fact that coffee can only grow in certain climates, so making up for shortfalls by finding new sources isn't as simple as it may be in other markets. Meanwhile, demand, while not terribly dynamic, is at a record level and continues to grow.

“When prices are up due to low supply and high demand, coffee farmers typically invest in land and new processing equipment for increased capacity," Turer said. "After a few years, when production is up, and demand is steady, futures prices will weaken as expected.”

Given current conditions, should we expect the price of our daily fix to skyrocket? Not exactly. Soaring global prices for coffee beans on futures markets don't necessarily mean prices at your local coffee shop or supermarket will follow suit. For one thing, the price of raw coffee is just one of many input costs determining retail prices, and the fact that roasters lock in prices, among other things, decreases the price volatility at the retail level. It also takes a while for changing market dynamics to reach consumers.

"Raw materials costs fluctuate aggressively but retail prices are difficult to change," Turer said. "Retail coffee prices are not like gasoline prices where the price at the pump may change every day."

The Bottom Line

The coffee commodity market can be highly volatile and occasionally this can lead the big changes in retail prices. But while the recent record prices in global coffee futures markets are a concern, consumers shouldn't expect a sudden commensurate jump in the price they pay for their daily cup. Retail prices rarely track the futures market precisely, and retail price depends on far more than the cost of beans.

For commodity traders, the price of coffee is prone to booms and busts. For drinkers, it's fortunately a lot less topsy-turvy.