If you follow the coffee industry, you’ve probably heard about the major problems happening in Central America right now due to ‘leaf rust’ destroying millions of coffee plants. And, you’ve probably wondered how this is going to effect the price you pay for your daily cup of coffee. The hard truth is, it’s definitely going to have an effect.
What experts believe is going to happen is in effect like a trade price ‘mood swing’. Coffee was at a high peak in pricing in 2011 due to a global shortage, however since that peak prices have been continuously falling. Currently it sits around $1.40 a pound, where as in 2011 it was about $3 a pound. This price drop mainly had to do with Brazil’s record crop numbers as the producer of a 3rd of the world’s coffee.
Coffee prices have been so low, even Dunkin Donuts announced a significant price decrease in their pre-packaged coffee products by an average of 6%. They quote this is “in response to sustained declines in green coffee costs.” Maxwell House is also expected to follow suit in this trend. Unfortunately, you probably won’t see this price cut with specialty coffee companies such as Starbucks and Caribou Coffee, but they don’t appear to be going up.
So, that’s the good news. Right now there is an over-supply that is keeping the market going, but it’s not projected to last through the destruction of coffee crops that is diminishing the supply at an astonishing rate. Later this year, when the supply is short of the demand, prices will be going steeply up again most likely. Unfortunately, the ‘leaf rust’ epidemic that is coursing its way through Central America isn’t going away any time soon, even though it is being consistently worked on. Costa Rica and Guatemala are expecting the largest drop in their coffee production due to the plant disease, and they are two of our biggest and most beloved suppliers.