Why Coffee Prices are Going Up

Coffee Prices Going UpIt's been an interesting few months watching the price of coffee climb higher and higher.  We've tried to absorb those increases hoping the market would go back down.  But alas, it doesn't look like that's going to happen anytime soon and the futures index price has reached a 14 year high.  

For our customers who enjoy buying Blacksmith Coffee at their favorite grocery store, you will probably be seeing a price increase very soon, if you haven't already, as we've had to increase our wholesale prices to our stores. But, you'll notice other brands prices going up too....or their bags getting smaller.  

Blacksmith Coffee customers have told us that they like our 14oz portion sizes, so we won't be changing that.  Let's face it, nobody is really fooled when the package gets smaller, but the price doesn't! So,14oz will remain our standard bag size.  

Not only will you notice packaged coffee prices increasing, you'll start seeing it at your favorite local coffee shop too. From Starbucks to Rome, cafes worldwide are raising drink prices to keep up with the markets.

So why are coffee prices reaching such high levels?

Answer: It depends on who you talk to.  If you listen to the talking heads, or get your news from the mainstream media, they'll tell you that it's due to bad weather and stock hoarding in major producing nations.  If that were true, I think we could expect prices to come back down when the weather improves and somebody decides to sell their coffee reserves, right?  

But, I don't buy it.  There's always bad weather somewhere and ag producing nations are forever trying to control the supply side of their market to keep prices elevated.  

Why I believe coffee prices are going up and they aren't going to come back down.... First of all, it's not really about the supply side.  Major analysts keep talking about supply issues - weather, stockpiles, lack of cherry pickers, blah, blah, blah.

The real reason coffee costs more, and always will is because of one thing......

GLOBAL DEMAND is increasing as emerging economies "discover" the joy of coffee.  I say "discover" because in many third world countries, robusta bean coffee has been heavily consumed in the form of instant coffee.  That's because it's cheap.  As the global middle class increases in size, so will it's tastes, and that includes coffee.  After all, who really prefers the taste of instant coffee to a high quality arabica bean coffee?

I don't know why, but I haven't really heard anyone in the mainstream media address these three important realities:

  1. China's  burgeoning middle class has discovered specialty coffee and it's consumption is on the rise.
  2. India has discovered specialty coffee and it's consumption is on the rise.
  3. Brazil has discovered specialty coffee and it's consumption is on the rise.
Interestingly, North America's coffee consumption is on the decline.  I would surmise that is because our middle class is declining too.  

So what do higher prices mean for the discriminating coffee drinker?  

Simply put, it means prepare to pay more for coffee from now on.  Prepare to find you favorite single-origin coffee harder to find than ever before.  Some of our customers have been asking us when we're going to get more India Mysore Nuggets Extra Bold in.  Problem is, it hasn't been available for six months or more.  (More is finally coming soon however! :-)  Bottom line: The world is finding out how wonderful great coffee is, and they're willing to pay more to enjoy it.  

On a positive note, even at higher prices, premium coffee is still a cheap beverage considering how good it is.  Depending on how strong you make your coffee, you will yield between 30 to 50 cups per pound of coffee. So even if you take our sporadicly available Jamaican Blue Mountain - Mavis Bank coffee into account, at $40/pound, you are looking at between .80 cents and $1.33/cup for what is arguably the finest coffee in the world.  That's still less than a bottle of water from a vending machine!

If you'd like to read more about this topic than the links already provided, an excellent article on the situation is this Reuters article.

Thanks for reading and thanks for drinking Blacksmith Coffee!
  • Shaaron Renart says...

    I’ve been watching the size of coffee cans getting smaller and the price going up, but last week a can of Columbian was $10.99 and this week it’s $15.99. What’s up with that?

    On Jul 21, 2011

  • Melissa Ford says...

    I’m happy to hear that the Mysore Nuggets is coming back! It’s my favorite coffee.

    On Feb 01, 2011

  • Brandon Jenkins says...

    Thank you Mark !
    This has been very interesting, and helpful to understand!

    On Nov 11, 2010

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