Inflation is targeting your cup of coffee

Even coffee isn’t immune to the forces of inflation and harsh weather. On Thursday, coffee futures hit their highest level since January 2012. It’s just the latest increase in the value of a commodity that has increased by more than 80% so far this year. Unfortunately, this implies that coffee lovers will have to spend more or cut back on their coffee consumption. This will further exacerbate the inflationary pressures that are already concerning millions of people.

Drought and extreme frost conditions in Brazil, the world’s largest producer of coffee beans, are the main reasons for the latest hikes in coffee prices. Extreme weather has put a strain on coffee supplies and sounded the alarm in financial markets. According to Carlos Mera, head of agricultural commodities research at Rabobank, the rising rates are causing panic. The weather has been terrible for coffee, particularly in Brazil, Mera added.

Climate Change and Food Crisis

Coffee inflation is the most recent illustration of how severe weather affects farmers and their products worldwide. As a result, food is becoming more costly for ordinary people throughout the world. According to the United Nations’ Food and Agriculture Organization, global food prices have risen 31% in the previous year as of August.  

A prolonged drought has hit Brazil’s coffee-growing areas. This might be the country’s worst dryness in over a century. Many other parts of the world are also affected by the changing climate. In July, Brazil had its worst frost since 1994 that greatly harmed the coffee and other crops.

On the other hand, analysts referred to the continued supply chain chaos that is generating problems all over the world, including a shortage of shipping containers.

COVID aftershocks

Demand and consumption, on the other hand, have remained strong despite the pandemic’s effects. The consumption in the offices and coffee shops has switched to at-home consumption during the lockdown. Covid had little effect on demand, according to the National Coffee Association, the industry’s trade association.

Will coffee prices ever be back to normal?

Coffee prices have risen in recent years, but not as substantially as many other commodities. According to the October consumer inflation data, coffee costs have increased by 4.7% in the last year. This is lower than total inflation, which reached a 30-year high in October. This price increase was because some coffee businesses, such as Starbucks, purchased coffee in advance and utilized hedging tactics to lock the pricing. The bad news is that if costs remain high, coffee users will soon face higher pricing.