Speed Reads


Brazil's drought might make your coffee habit a lot more expensive

CC by: Rudolf Schuba

There are a lot of articles out saying that the price of coffee beans is rising too fast for even Starbucks, and that the Seattle coffee giant has simply stopped buying beans. That's not quite true. The source of these articles is a Wall Street Journal interview with Starbucks' chief coffee officer, Craig Russell, who said that Starbucks has very sharply reduced its coffee purchases in the past few weeks as the price of green (unroasted) beans rose over concerns about a drought in Brazil, the world's largest coffee producer.

But of course Starbucks is still buying coffee beans — as Russell explains, the company has locked in prices and bean supplies until Oct. 1, then 40 percent of prices for the next year. Starbucks isn't going shopping for new sources of beans right now because prices are up almost 90 percent this year, and why would it? Quartz's Matt Phillips has this nice chart showing just how crazy coffee's price trajectory has been this year:

But 87 percent from what? As Bloomberg's Alan Bjerga notes in the audio clip below, from NPR's Here & Now, coffee prices were at historic lows just months ago. Did coffee shops and roasters reduce their prices then? Of course not. In fact, the record high for coffee beans on the international market is $3.089 a pound, reached in May 2011. A pound of coffee at Starbucks and comparable retailers costs $12 or more. Last week, Starbucks reported a $427 million profit for the most recent quarter. It can handle the current two-year high of $2.15 a pound for green coffee beans.*

That's not to say that your morning cups of coffee won't get more expensive. Much of what you're paying for in that latte or mocha is the milk, and milk prices are also going up. Also, a 90 percent rise in the raw ingredient of coffee is still a 90 percent rise. But lots of countries grow delicious coffee. If you're not too particular about where your arabica beans come from, or you make your coffee at home, you probably won't see much of a price hike unless green coffee prices keep on rising — or coffee retailers use these sometimes credulous news stories to justify raising prices, because capitalism.

*A pound of green coffee beans doesn't make a roasted pound — the roasting process causes the beans to lose moisture, the darker the roast, the more the weight loss.