Bad news, coffee drinkers: According to the latest inflation report, the average retail price of roasted coffee has risen 14.8% since last July.
Worse news: Some of President Donald Trump’s highest new
tariffs
started this month and are throwing the coffee supply chain into disarray. They appear destined to send prices of America’s go-to beverage even higher in the months ahead.
High-quality coffee beans are grown in a few key countries, virtually all of which are subject to new tariffs. Brazil is by far the biggest, supplying 37% of global production last year, and it was hit with a blanket 50% tariff that took full effect Aug. 6.
Bean prices are jumping
Brazil’s high-quality arabica beans form the base of many popular specialty blends. Industry sources we spoke to say that a 50% price hike is likely too much for roasters and consumers to swallow, with importers and roasters alike wondering how to respond.
“I can tell you from conversations with some customers, there’s not an appetite to purchase large volumes of Brazilian coffee with a new 50% tariff,” says Peter Radosevich, a trader and international sales team leader for specialty importers Royal Coffee, based in Oakland, Calif.
“One of Brazil’s greatest selling points, because it’s one of the largest producers, has been its price point. And so when you remove that from the equation, I think people will move away from using it for sure.”
Which raises the question of how to find a replacement in a finite market where virtually every viable bean grown already finds its way into a cup somewhere in the world.
“Right now, roasters in the U.S. are scrambling to figure out, with the Brazil tariffs, what they’re going to replace it with,” says Spencer Turer, vice president of Coffee Enterprises, a Vermont-based company that provides consulting and product testing to the coffee trade.
“Or, they’re just going to have to absorb the costs and either reduce their profitability or pass those prices on to the consumer.”
Tariffs ranging from 10% to 50% are now in place on imports from almost every coffee-producing country.
The lone exception is Mexico, where coffee is covered by the pre-existing U.S.-Mexico-Canada Agreement (USMCA). But according to both Radosevich and Turer, prices are rising there even without tariffs — driven by high demand as buyers crowd in to buy up available beans.
Before those beans can become a cup of joe — whether you make your coffee at home or pick up a cup from a cafe — they have to be roasted. So where does the current market turmoil leave roasters, of which there are thousands in the U.S., large and small?
“Intellectually, I would look at where the harvest cycles are, where coffee is fresh, what’s going to taste similar,” says Turer. “But once you make that conclusion, you have to realize that there are hundreds of roasters that have probably reached that conclusion before you, and already made those phone calls to the importers.”
Why tariffs on coffee?
Fair question. A
traditional rationale for tariffs
, and one that Trump cites, is to defend a domestic industry. But coffee, as an agricultural product, is not climactically suited for the contiguous United States. It is produced on only a miniscule scale (by global standards) in Hawaii and Puerto Rico, with some fledgling efforts in California.
Coffee is, essentially, collateral damage in Trump’s push to reshape global trade.
Until the day Brazil’s tariffs went into effect, there were hopes that coffee would get an exemption, and the co-chairs of the bipartisan Congressional Coffee Caucus (yes, there’s a Congressional Coffee Caucus) sent a letter to the administration in late July urging that unroasted coffee be exempted from all tariffs.
“Unlike many other goods affected by recent tariffs, coffee is not produced at a scale within the United States that can meet domestic demand,” stated the letter, signed by U.S. Reps. Jill Tokuda, D-HI, and William Timmons, R-S.C., co-chairs of the caucus.
“Every $1 of imported coffee creates an estimated $43 in value throughout the supply chain, and coffee shops, roasters, and distributors serve as important economic engines supporting small businesses and creating jobs that help sustain local economies.”
Hopes for a coffee exemption haven’t panned out, effectively keeping the industry in paralysis. An exemption could still come in an environment where fresh tariffs announcements are made almost daily, but roasters no longer have the luxury of waiting.
The coffee supply chain: a thumbnail sketch
It’s a long road from a coffee farm to your cup.
Coffee producers around the world can range from large plantations to small family-run operations, as well as cooperative farms. After harvest, the green beans — the seed of a coffee tree “cherry” — can be dried and processed (by one of several methods) at the farm or at a shared facility before being bagged for export.
Like other commodities, the baseline price of coffee is set by a futures market that is largely populated by traders who may never take possession of a bag of beans.
The factors influencing the futures price of coffee can vary, from on-the-ground conditions like weather patterns and crop yields to technical factors such as oil prices, interest rates, and the strength of the U.S. dollar. For example, back-to-back droughts in Brazil have led to price spikes in recent years. Coffee prices are known for their volatility, fluctuating day to day, month to month, and week to week in ways that may seem illogical.
The quality of unroasted beans also plays a role in their pricing, with lower-quality beans selling for less and desirable varietals fetching higher prices. Specialty coffee beans grown at higher elevations in countries like Colombia and Ethiopia are highly sought after and can be marketed as single-origin coffees or used in blends. Importers, of which there are more than 7,000 in the U.S., play a crucial role in building relationships with coffee producers worldwide.
Importers like Radosevich’s company, Royal Coffee, import beans from over 30 countries and must navigate the complexities of maintaining a stable supply of coffee at a reasonable price while sustaining relationships with suppliers. Global shipping disruptions further complicate the process of getting the beans to market in the U.S., as transport companies constantly adjust their shipping routes.
Once importers secure their coffee supply, they sell to roasters in the U.S. and beyond, either through advance contracts or spot transactions. The coffee market includes both large players like Starbucks and Keurig, as well as thousands of independent roasters in the U.S. Tariffs imposed on coffee imports can impact roasters, who may pass on the added costs to consumers.
Companies like Tony’s Coffee have been dealing with tariffs and price escalations in the coffee market, affecting their sales and distribution channels. Roasters like Chuck Nigash of Elevated Roast are striving to maintain stable prices for their customers while adjusting to the changing landscape of the coffee industry.
The disruptions caused by political issues, currency fluctuations, and tariffs in the coffee supply chain can create financial stress for roasters. Some smaller companies may struggle to absorb tariff costs, leading to potential closures. The intricate nature of the coffee supply chain means that any disruptions can have far-reaching consequences for businesses in the industry.
The United States, despite being the largest coffee consumer globally, is surpassed by the European Union in terms of coffee consumption. Interestingly, the EU already imports a significant amount of coffee from Brazil, one of the world’s leading coffee producers.
In contrast, China recently authorized 183 Brazilian coffee companies to export their products to the country. This move is not just about meeting the rising demand for coffee in China but also seen as a strategic maneuver to strengthen ties with Brazil amid escalating tensions with the United States.
Despite the geopolitical dynamics at play, the coffee industry has a resilient nature. As industry expert Turer puts it, “All coffee will find a home.”
So, what are coffee drinkers to do?
A recent survey by the National Coffee Association reveals that coffee consumption in the United States continues to rise, with 66% of adults enjoying a daily cup of coffee. The preference for specialty coffees has also seen a significant increase.
The survey highlights the diverse ways in which Americans consume coffee, whether it’s a quick fix at a coffee shop or a homemade brew. Interestingly, a majority of coffee drinkers prefer to make their coffee at home, sourcing their supplies from various retail outlets.
As coffee prices face upward pressure, consumers may need to make adjustments to their coffee habits. This could involve opting for more affordable options, reducing out-of-home coffee consumption, or simply cutting back on overall coffee intake.
Adapting to these changes might not be easy, considering the ritualistic nature of coffee consumption. As Turer aptly puts it, “It’s a ritualistic product, and consumers expect consistency in every cup.”
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