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Why coffee could cost more at groceries, cafes – Cleveland, Ohio

Cleveland, Ohio 2021-09-27 20:47:00 –

Silverspring, Maryland (AP) — A confluence of factors is pushing up the cost of growing beans, as if a cup of coffee wasn’t expensive enough, and begins filtering local cafes before it’s over. May be a year.

After years of hovering for nearly $ 1 per pound, coffee futures (the price at which bulk buyers agree to pay for coffee on delivery months ahead) doubled in late July, since 2014. It has reached an unseen height. It remains rising at around $ 1.90 per pound.

Coffee lovers who have already paid more than $ 8 for bags and up to $ 5 for cups in supermarkets may be desperate for even higher prices, but soaring coffee prices in the international futures market do not necessarily permeate consumers. Not always.

This looks at several factors that may determine whether Americans will pay more for the morning shock in the near future.

What happened?

Persistent droughts followed by two July frosts pierced Brazil’s coffee production, raising the wholesale price of popular Arabica beans to more than $ 2 per pound. Carlos Mela, an analyst at Rabobank’s coffee market, said frost would have a significant impact on the 2022-23 harvest.

Brazil’s frost was followed by COVID-related supply chain roars, shipping container shortages, labor shortages and other production problems. Adding virtually all the cost increases can brew a bitter cup for coffee drinkers.

“This is unprecedented,” said Alexis Rubinstein, Editor-in-Chief of Coffee & Cocoa, a product brokerage StoneX Group. “Until now, it has never been such a perfect storm. This is usually just a supply and demand scenario.

“We have never addressed supply and demand issues, in addition to logistics issues, labor issues, and pandemics.”

Why are retail prices going up?

It’s difficult to determine the magnitude of crop loss in Brazil, but estimates fluctuate between 2 to 6 million bags of coffee, according to Mela. This is about 12% of the production from the world’s largest producer of Arabica, the bean used in most coffees sold worldwide. Low supply means high prices in most cases.

Grace Wood, an industry analyst at market research firm IBIS World, said it will almost certainly rise in 2022 as consumer demand is expected to increase if coffee prices do not rise by the end of this year. Stated.

“It only contributes to more demand, which will further disrupt operations and would be more difficult for operators who are already experiencing supply problems,” Wood said.

According to Mela, those who buy coffee beans at grocery stores are likely to see a more pronounced increase in prices, as about half the cost of the bags on the shelves come solely from the beans themselves. That is. However, in large coffee shops, beans cost only about 5% of hot coffee, so Roaster added, “It may not be necessary to take over the increase immediately.”

Is it certain that retail prices will rise?

Rising coffee prices in the international futures market do not guarantee that your favorite roaster will rise, but it seems likely. Damaged crops in Brazil are more than a year old from harvest, and many factors have plenty of time to turn around.

Rubinstein said high prices in the international market can often stimulate production and farmers will have more money to invest in crops. But it also depends on whether the big roasters have enough beans to get through them, but long prices remain rising.

Starbucks, the world’s largest coffee retailer, has suggested that Brazil’s production is low and there is no need to raise prices. Kevin Johnson, president and chief executive officer of a Seattle-based coffee chain, called his company in the midst of rising prices for Arabica and supplied his company for 14 months. Said that it will be supplied from 2021 to most of 2022.

What about my local roaster?

Even small, independent professional roasters have contracts to buy beans in advance, so beans will not be paralyzed in the event of a shortage like Brazil. Also, because we source from countries around the world, gaps from one location are often filled in another.

Chris Vigilante, co-owner of Vigilante Coffee, which has a store in the suburbs of Maryland, Washington, DC, said most specialty roasters do not buy beans in the same international commodity markets as major companies such as Nestle and Keurig Dr Pepper. “Therefore, it’s not that much influenced by (Brazil), but you’ll feel the pressure,” said the vigilant.

Vigilants said they would pay $ 3.50 to $ 5.50 per pound for most of his beans. These beans are of higher quality and are produced on smaller farms. There are no plans to raise prices, but if other small shops raise prices, it is highly likely that the cost of other necessities has risen.

“I’ve seen other specialty coffee roasters talking about price increases, but it may not be due to the cost of coffee, but to the cost of some other supply, such as cups and equipment. No, “said the vigilant.

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