The climate crisis and rising demand are driving an unprecedented surge in global coffee prices. The wholesale price of coffee beans has risen by over 30% since the beginning of November, reaching a 47-year high in mid-December, surpassing $3.30 per pound.
The impact on Israel is expected to be dramatic. The local coffee market, valued at approximately NIS 1.5B annually, is set to absorb the global price hikes. According to Storenext data, coffee sales in Israeli retail chains amount to about NIS 1B annually, with instant coffee leading at around NIS 460M. The global price increase is anticipated to affect capsule sales significantly, which currently constitute about 40% of Israel's financial coffee market.
Despite being one of the most consumed beverages worldwide, coffee can only grow under very specific conditions: Misty, humid, tropical climates with rich, disease-free soil. Except for a small quantity grown in Hawaii, the United States produces almost no coffee domestically and is the world's largest importer of coffee beans. The limited sources of supply make global coffee prices particularly sensitive to extreme weather conditions.
The primary cause of the current crisis is a severe drought in Brazil, the world's largest coffee exporter, which has greatly impacted this year's harvest and may threaten next year's as well. Simultaneously, Vietnam faced a severe drought followed by heavy rains, damaging the world's largest robusta reserves, a variety primarily used in instant coffee.
"In the long run, we’ll see much higher prices," says Thaleon Tremain, CEO and co-founder of Pachamama Coffee in California, speaking to The New York Times. Tremain, who sells his specialty coffee beans at prices higher than the global market rate, wants his customers to view coffee as a luxury item and pay accordingly so that the farmers growing his beans in countries like Peru, Nicaragua, and Ethiopia can cover their costs.
Alongside the drop in production, global demand continues to rise, partly due to increased coffee consumption in China. A report from the U.S. Department of Agriculture in June found that coffee consumption in China has risen by more than 60% over the past five years.
Major coffee companies are already preparing: Nestlé, the world’s largest coffee producer, announced last month that it plans to raise coffee prices next year and reduce packaging sizes. J.M. Smucker, owner of coffee brands like Folgers and Dunkin’ Donuts, also announced price hikes in October.
According to Kevin Riney, a professor at Rutgers University who studies coffee production, it could take up to two years for Brazil's coffee crops to recover from the drought. However, he is concerned that coffee prices are locked into an upward trajectory, similar to other high-value crops affected by climate change. "In some ways, it’s a sign of what’s to come," Riney says. "Suitable coffee-growing regions will shrink over time," as global warming and practices like deforestation continue to threaten the industry’s sustainability.
Scott Conary, president of Carrboro Coffee Roasters, an independent company in North Carolina, is worried about price volatility. "From the perspective of industry sustainability," he says, "this isn’t healthy." In the past, he coped with volatility by gradually raising prices—less than $1 at a time for a cup of coffee at his flagship cafés and a bag of beans. For the coming years, he is most concerned about sharp increases in transportation and storage costs.